EX-99.1 2 tm2029708d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

 

In re Akorn, Inc., et al. Case No. (Jointly Administered): 20-11177
  Reporting Period: July 1, 2020 - July 31, 2020

 

MONTHLY OPERATING REPORT

 

Submit copy of report to any official committee appointed in the case.

 

      Document  Explanation  Affidavit/Supplement
REQUIRED DOCUMENTS  Form No.  Attached  Attached  Attached
Schedule of Cash Receipts and Disbursements  MOR-1  X      
Bank Reconciliation (or copies of debtor's bank reconciliations)  MOR-1a  X  See Attestation  X
Schedule of Professional Fees Paid  MOR-1b  X      
Copies of bank statements        X   
Cash disbursements journals        X   
Statement of Operations  MOR-2  X      
Balance Sheet  MOR-3  X      
Status of Postpetition Taxes  MOR-4  X  See Attestation  X
Copies of IRS Form 6123 or payment receipt        X   
Copies of tax returns filed during reporting period        X   
Summary of Unpaid Postpetition Debts  MOR-4  X  X   
Listing of aged accounts payable  MOR-4  X      
Accounts Receivable Reconciliation and Aging  MOR-5  X      
Debtor Questionnaire  MOR-5  X      

 

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

 

     
Signature of Debtor   Date
     
     
     
Signature of Joint Debtor   Date
     
     
/s/ Duane Portwood   August 28, 2020
Signature of Authorized Individual*   Date
     
     
Duane Portwood   Chief Financial Officer
Printed Name of Authorized Individual   Title of Authorized Individual

 

*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.

 

MORPage 1 of 12 

 

 

In re Akorn, Inc., et al. Case No. (Jointly Administered): 20-11177
  Reporting Period: July 1, 2020 - July 31, 2020

 

Notes to the Monthly Operating Report

 

General:
The report includes activity from the following Debtors and related Case Numbers:

 

Debtors  Case Number Debtors  Case Number
Akorn, Inc.  Case 20-11177 Covenant Pharma, Inc.  Case 20-11188
10 Edison Street LLC  Case 20-11178 Hi-Tech Pharmacal Co., Inc.  Case 20-11189
13 Edison Street LLC  Case 20-11180 Inspire Pharmaceuticals, Inc.  Case 20-11190
Advanced Vision Research, Inc.  Case 20-11182 Oak Pharmaceuticals, Inc.  Case 20-11192
Akorn (New Jersey), Inc.  Case 20-11183 Olta Pharmaceuticals Corp.  Case 20-11191
Akorn Animal Health, Inc.  Case 20-11185 VersaPharm Incorporated  Case 20-11194
Akorn Ophthalmics, Inc.  Case 20-11186 VPI Holdings Corp.  Case 20-11193
Akorn Sales, Inc.  Case 20-11174 VPI Holdings Sub, LLC  Case 20-11195
Clover Pharmaceuticals Corp.  Case 20-11187     

 

Notes to the MOR:

 

This Monthly Operating Report ("MOR") has been prepared solely for the purpose of complying with the monthly reporting requirements applicable in the bankruptcy cases and is in a format acceptable to the U.S. Trustee. The financial information contained herein is unaudited, limited in scope and as discussed below, is not prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) nor in accordance with federal or state securities laws or other applicable non-bankruptcy law or in lieu of complying with any periodic reporting requirements thereunder.

 

The unaudited financial statements have been derived from the books and records of the Debtors. The information furnished in this report includes primarily normal recurring adjustments, but not all the adjustments that would typically be made for the quarterly and annual financial statements to be in accordance with U.S. GAAP. Furthermore, the monthly financial information contained herein has not been subjected to the same level of accounting review and testing that Akorn, Inc., and related Debtors apply in the preparation of its quarterly and annual financial information in accordance with U.S. GAAP. Accordingly, upon the application of such procedures, the Debtors believe that the financial information may be subject to change, and these changes could be material.

 

The financial statements presented in MOR-2 and MOR-3 do not include elimination entries for intercompany balances related to non-debtor affiliates. Investments in subsidiary balances are recorded at cost which may not be in accordance with U.S. GAAP. The amounts currently classified as liabilities subject to compromise may be subject to future change as the Company completes its analysis of prepetition liabilities.

 

The results of operations contained herein are not necessarily indicative of results which may be expected from any other period or for the full year and may not necessarily reflect the results of consolidated operations, financial position and cash flows of the Debtors in the future. The Debtors caution readers not to place undue reliance upon the MOR. There can be no assurance that such information is complete and the MOR may be subject to revision.

 

Notes to MOR-1a:

 

The Debtors maintain 6 total bank accounts (collectively, the “Bank Accounts”) at two financial institutions (the “Banks”). The Bank Accounts vary in purpose and function.

 

Notes to MOR-2:

 

The Income Statement reflects revenue and expenses for the Month of July, 2020 on a consolidated basis for the US Debtor entities.

 

Notes to MOR-3:

 

The Balance Sheet reflects assets, liabilities, and stockholders equity on a consolidated basis for the US Debtor entities.

 

As a result of the commencement of these Chapter 11 Cases, the payment of pre-petition indebtedness is subject to compromise or other treatment under a Chapter 11 plan. The Bankruptcy Court authorized the Debtors to pay certain prepetition claims, including but not limited to general trade and tax claims. To the extent such claims have been categorized as “Liabilities Not Subject to Compromise,” the Debtors reserve their right to dispute their obligation to make such payments. The Debtors have been paying and intend to continue to pay undisputed post-petition claims arising in the ordinary course of business.

 

The liability information, except as otherwise noted, is listed as of the close of business as of the end of the month. Accordingly, the Debtors reserve all rights to amend, supplement or otherwise modify this Monthly Operating Report as necessary and appropriate, but shall be under no obligation to do so. The Debtors have paid certain prepetition liabilities in accordance with orders approved by the Bankruptcy Court authorizing such payments. The Debtors believe that all undisputed post-petition accounts payable have been and are being paid according to agreed-upon terms specific to each vendor and/or service provider and as authorized by the Bankruptcy Court. Payments are limited to payments made to vendors and service providers who provide services that are necessary to the operation of the Debtors’ business. In addition, the liabilities reported in this Monthly Operating Report do not reflect any analysis conducted by the Debtors regarding potential claims under section 503(b)(9) of the Bankruptcy Code. Accordingly, the Debtors reserve any and all of their rights to dispute or challenge the validity of any claims asserted under section 503(b)(9) of the Bankruptcy Code or the characterization of the structure of any transaction, document or instrument related to any creditor’s claim.

 

Notes to MOR-4:

 

Akorn, Inc., and related Debtors received authority pursuant to certain first-day orders for the payment of prepetition taxes and certain other prepetition liabilities. The Debtors are current on all post petition payables other than disputes that arise in the ordinary course of business. While an accounts payable aging is presented for trade accounts payable, all other post-petition liabilities are current and presented as such on MOR 3.

 

Notes to MOR-5:

 

The Debtors reconcile and age individual customer accounts receivables in the normal course of the Debtors' operations.

 

MORPage 2 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 1
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 1, 2020 - July 31, 2020
     
SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

 

Actual Cash Activity (7/1/2020-7/31/2020)
USD in 000s

 

Case No.  20-11177  20-11182  20-11183  20-11189  20-11178  20-11180  20-11185  20-11186  20-11174  20-11187  20-11188  20-11190  20-11192  20-11191  20-11194  20-11193  20-11195   
Debtor Entity Names  Akorn, Inc.  Advanced Vision Research, Inc.  Akorn (New Jersey), Inc.  Hi-Tech Pharmacal Co., Inc.  10 Edison Street LLC  13 Edison Street LLC  Akorn Animal Health, Inc.  Akorn Ophthalmics, Inc.  Akorn Sales, Inc.  Clover Pharmaceuticals Corp.  Covenant Pharma, Inc.  Inspire Pharmaceuticals, Inc.  Oak Pharmaceuticals, Inc.  Olta Pharmaceuticals Corp.  VersaPharm Incorporated  VPI Holdings Corp.  VPI Holdings Sub, LLC  Total
RECEIPT                                                      
Net Customer Receipts  39,893  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  39,893
Other Receipts  4  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  4
Total Receipts  39,897  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  39,897
                                                       
OPERATING DISBURSEMENTS                                                      
Royalties  -  -  -  313  -  -  -  -  -  -  -  -  -  -  -  -  -  313
Payroll  10,487  -  2,461  3,379  -  -  -  -  1,043  -  -  -  -  -  -  -  -  17,370
Vendor Payments  27,369  67  2,304  6,561  -  -  -  -  -  -  -  -  -  -  -  -  -  36,301
Capex  483  -  214  61  -  -  -  -  -  -  -  -  -  -  -  -  -  757
Taxes  250  -  -  -  -  -  -  -  17  -  -  -  -  -  -  -  -  267
Intercompany Trade  5,200  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  5,200
FDA Remediation  235  -  117  -  -  -  -  -  -  -  -  -  -  -  -  -  -  352
Total Operating Disbursements  44,023  67  5,096  10,314  -  -  -  -  1,060  -  -  -  -  -  -  -  -  60,560
NON-RECURRING                                                      
Professional Fees (Financial & Legal)1  895  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  895
Interest Payments and Fees  10,512  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  217
Intercompany Funding  217  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  10,512
Total Non-recurring Disbursements  11,625  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  11,625
Total Disbursements  55,648  67  5,096  10,314  -  -  -  -  1,060  -  -  -  -  -  -  -  -  72,185
US TRUSTEE FEE CALCULATIONS ($)                                                      
US Trustee Fees  250,000  650  50,958  103,143  375  375  375  375  10,600  375  375  375  375  375  375  375  375  419,851

 

Note

[1] Includes fees for both retained and non-retained professionals.

 

MORPage 3 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 1a
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 31, 2020
     
BANK ACCOUNT INFORMATION
Whole Values

 

Legal Entity   Bank   Last 4 Digit of Account
Number		   Description   Bank Balance  
Akorn, Inc.   Bank of America   8391   Collections and Concentration   29,201,964  
Akorn, Inc.   Bank of America   6603   Operating Disbursements   30,078  
Akorn, Inc.   Bank of America   0893   Payroll Disbursements   52,200  
Akorn, Inc.   Bank of America   8409   Treasury Activity   37,564  
Akorn, Inc.   Bank of America   8878   Utilities Adequate Assurance Account   362,526  
Akorn, Inc.   Wilmington Savings Fund Society Bank   4323   Debtor in Possession / DACA   25,211,626  

 

MORPage 4 of 12 

 

 

  

In re Akorn, Inc., et al.   MOR - 1a
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 31, 2020

 

BANK RECONCILIATION  

 

The above-captioned debtors (the "Debtors") hereby submit this attestation regarding bank account reconciliations in lieu of providing copies of bank statements, journals, and account reconciliations.

 

I attest that each of the Debtors' bank accounts is reconciled to bank statements. The Debtors' standard practice is to ensure that each bank account is reconciled to bank statements once per month within 31 days after the month end.

  

/s/ Duane Portwood   August 28, 2020  
Signature of Authorized Individual*   Date  
       
       
Duane Portwood   Chief Financial Officer  
Printed Name of Authorized Individual   Title of Authorized Individual  

 

*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.  

 

MORPage 5 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 1b
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 31, 2020

 

SCHEDULE OF RETAINED PROFESSIONAL FEES PAID

 

      Amount Paid  Cumulative Payments
Since Filing		 
Payee  Role of Professional   Fees   Expenses   Fees   Expenses 
KIRKLAND & ELLIS LLP  DEBTORS' COUNSEL  $-  $-  $-  $- 
RICHARDS LAYTON & FINGER  DEBTORS' COUNSEL  $-  $-  $-  $- 
PJT PARTNERS  DEBTORS' INVESTMENT BANKER  $-  $-  $-  $- 
PRICEWATERHOUSECOOPERS CORPORATE FINANCE LLC  DEBTORS' INVESTMENT BANKER  $-  $-  $-  $- 
ALIXPARTNERS LLP  DEBTORS' FINANCIAL ADVISOR  $-  $-  $-  $- 
GRANT THORNTON LLP  DEBTORS' FINANCIAL ADVISOR  $-  $-  $-  $- 
KURTZMAN CARSON CONSULTANTS INC1  DEBTORS' ADMINISTRATIVE ADVISOR  $53,226  $31,557  $53,226  $31,557 
JENNER & BLOCK  COMMITTEE COUNSEL  $-  $-  $-  $- 
SAUL EWING ARNSTEIN & LEHR  COMMITTEE COUNSEL  $-  $-  $-  $- 
HURON CONSULTING GROUP  COMMITTEE FINANCIAL ADVISOR  $-  $-  $-  $- 

 

Note: 

[1] Payments to Kurtzman Carson Consultants LLC (“KCC”), as disclosed herein, include amounts paid to KCC pursuant to the Order Authorizing Retention and Appointment of Kurtzman Carson Consultants LLC as Claims and Noticing Agent [Docket No. 76]

 

MORPage 6 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 2
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 31, 2020

 

UNAUDITED

STATEMENT OF OPERATIONS (INCOME STATEMENT)

 

(Units in 000's)      

 

   Consolidated 
Net Revenue   41,293 
      
COGS   27,508 
      
Gross Profit   13,785 
      
SG&A   15,958 
Research & Development   3,312 
Amortization of Intangibles   2,051 
Goodwill Impairment   - 
Impairment of intangibles   - 
Litigation (Gain) Loss   - 
      
Operating Income   (7,536)
      
Interest expense, net   11,520 
Deferred Financing Costs   - 
Other   (32)
Bankruptcy   3,183 
Income Tax   - 
      
Net Income   (22,207)

 

Note: 

The numbers presented above should be viewed in conjunction with the notes at the beginning of the MOR.

 

MORPage 7 of 12 

 

 

  

In re Akorn, Inc., et al.   MOR - 3
        Debtors Case No. (Jointly Administered): 20-11177
  Balance as of: July 31, 2020

 

UNAUDITED

BALANCE SHEET

 

(Units in 000's)    
   Consolidated 
Assets:     
      
Cash   46,753 
Accounts Receivable   136,988 
Accounts Receivable (intercompany)   1,527 
Inventory   178,684 
Other   79,153 
Other (Intercompany Loan - HETT)   1,830 
Current Assets   444,935 
      
PP&E, Net   216,765 
Goodwill   - 
Product License Rights   201,056 
Other   30,819 
Long-term Assets   233,040 
      
Total Assets   1,126,615 
      
Liabilities:     
      
Liabilities Subject to Compromise   74,867 
Accounts Payable   29,451 
Accounts Payable (Intercompany)   1,364 
Income Taxes Payable   (10)
Accrued Royalties   2,871 
Accrued Compensation   14,904 
Other Current Liabilities   82,243 
Current Portion of LTD   855,781 
Current Liabilities   986,604 
      
Long-term Debt     
Other   2,741 
Long-term Liabilities   2,741 
      
Total Liabilities   1,064,212 
      
Shareholders' Equity:     
      
Common Stock   608,829 
Retained Earnings   (546,389)
Accumulated Other Comprehensive Loss   (37)
Total Shareholders' Equity   62,403 
      
Liabilities & Shareholders' Equity:   1,126,615 

 

Note:

The numbers presented above should be viewed in conjunction with the notes at the beginning of the MOR.

  

MORPage 8 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 4
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 31, 2020

 

STATUS OF POST-PETITION TAXES

  

The above-captioned debtors (the "Debtors") hereby submit this attestation regarding Status of Post-petition Taxes in lieu of providing copies of post-petition tax payments and tax returns filed during reporting period.

 

I attest that each of the Debtors' taxing authorities have been paid on time when post-petition amounts become due. Also, tax returns are being filed in an orderly and timely fashion in accordance with tax return reporting deadlines. 

 

/s/ Duane Portwood   August 28, 2020  
Signature of Authorized Individual*   Date  
       
       
Duane Portwood   Chief Financial Officer  
Printed Name of Authorized Individual   Title of Authorized Individual  

  

*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor

is a partnership; a manager or member if debtor is a limited liability company.

 

MORPage 9 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 4
        Debtors Case No. (Jointly Administered): 20-11177
  Balance as of: July 31, 2020

 

ACCOUNTS PAYABLE AGING

 

As of July 31, 2020   Current    0-30 Days    31 - 60 Days    61 - 90 Days    >90 Days    Total 
Accounts Payables  $25,461,806   $1,673,878   $285,397   $1,586,625   $443,294   $29,451,000 
Percentage of Total   66%   14%   2%   14%   4%   100%

 

MORPage 10 of 12 

 

 

 

 

 

In re Akorn, Inc., et al.   MOR - 5
        Debtors Case No. (Jointly Administered): 20-11177
  Balance as of: July 31, 2020
     
ACCOUNTS RECEIVABLE AGING AND RECONCILIATION

 

As of July 31, 2020  Current   0-30 Days   31 - 60 Days   61 - 90 Days   > 90 Days   Total 
Gross Accounts Receivables  $216,189,160   $15,684,175   $113,435,175   $21,082,273   $12,804,615   $379,195,398 
Percentage of Total   57%   4%   30%   6%   3%   100%

 

Gross to Net Accounts Receivable as of July 31, 2020  Amount 
Total Gross Accounts Receivable at the end of the reporting period   379,195,398 
- Reserves for: Chargebacks, Rebates, Other   (242,207,432)
Total Net Accounts Receivable at the end of the reporting period   136,987,965 

 

MORPage 11 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 6
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: July 1, 2020 - July 31, 2020
     
DEBTORS QUESTIONNAIRE
     

 

Must be completed each month  Yes  No
1.   Have any assets been sold or transferred outside the normal course of business this reporting period?  If yes, provide an explanation below.     X
2.   Have any funds been disbursed from any account other than a debtor in possession account this reporting period?  If yes, provide an explanation below.     X
3.   Have all postpetition tax returns been timely filed?  If no, provide an explanation  below.  X   
4.   Are workers compensation, general liability and other necessary insurance coverages in effect?  If no, provide an explanation below.  X   
5.   Has any bank account been opened during the reporting period?  If yes, provide documentation identifying the opened account(s).  If an investment account has been opened provide the required documentation pursuant to the Delaware Local Rule 4001-3.     X

 

MORPage 12 of 12