EX-99.1 2 tm2032007d1_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: August 1, 2020 - August 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   9/30/2020
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: August 1, 2020 - August 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 August, 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: August 1, 2020 - August 31, 2020

 

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

 

Actual Cash Activity (8/1/2020-8/31/2020)
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   41,413    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    41,413 
Other Receipts1   7,907    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    7,907 
                                                                                           
Total Receipts   49,320    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    49,320 
                                                                                           
OPERATING DISBURSEMENTS                                                                                          
                                                                                           
Royalties   793    -    -    -    -    -    -    -    -    -    -           -    -    -    -    -    -    793 
Payroll   6,023    -    1,721    2,276    -    -    -    -    807    -    -    -    -    -    -    -    -    10,828 
Vendor Payments   13,092    230    1,536    1,658    -    -    -    -    -    -    -    -    -    -    -    -    -    16,515 
Capex   275    -    31    44    -    -    -    -    -    -    -    -    -    -    -    -    -    350 
Taxes   11    -    2    -    -    -    -    -    3    -    -    -    -    -    -    -    -    16 
Intercompany Trade   444    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    444 
FDA Remediation   70    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    70 
                                                                                           
Total Operating Disbursements   20,708    230    3,290    3,977    -    -    -    -    811    -    -    -    -    -    -    -    -    29,016 
                                                                                           
NON-RECURRING                                                                                          
                                                                                           
Professional Fees (Financial & Legal)   828    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    828 
Interest Payments and Fees   11,845    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    11,845 
Intercompany Funding   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    - 
                                                                                           
Total Non-recurring Disbursements   12,673    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    12,673 
                                                                                           
Total Disbursements   33,381    230    3,290    3,977    -    -    -    -    811    -    -    -    -    -    -    -    -    41,689 
                                                                                           
Cumulative Quarterly Disbursements                                                                                          
                                                                                           
July Disbursements   55,648    67    5,096    10,314    -    -    -    -    1,060    -    -    -    -    -    -    -    -    72,185 
August Disbursements   33,381    230    3,290    3,977    -    -    -    -    811    -    -    -    -    -    -    -    -    41,689 
                                                                                           
Total Cumulative Disbursements   89,030    297    8,386    14,292    -    -    -    -    1,871    -    -    -    -    -    -    -    -    113,874 
                                                                                           
US TRUSTEE FEE CALCULATIONS ($)                                                                                          
US Trustee Fees   250,000    2,967    83,859    142,915    -    -    -    -    18,707    -    -    -    -    -    -    -    -    498,448 

 

Note:

 

[1] Pursuant to Order (I) Authorizing the Sale of Certain Equity Interests in Non-Debtor Akorn India Private Limited Pursuant to 11 U.S.C. § 363 of the Bankruptcy Code, (II) Authorizing the Retention and Employment of PricewaterhouseCoopers Corporate Finance LLC in Connection Therewith, Effective as of the Petition Date, and (III) Granting Related Relief [Docket No. 365], the sale of Akorn India Private Limited was closed on 8/14/2020. The funds were repatriated shortly thereafter.

 

MORPage 3 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 1a
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: August 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   34,928,340 
Akorn, Inc.  Bank of America  6603  Operating Disbursements   2,443,592 
Akorn, Inc.  Bank of America  0893  Payroll Disbursements   74,555 
Akorn, Inc.  Bank of America  8409  Treasury Activity   12,743,690 
Akorn, Inc.  Bank of America  8878  Utilities Adequate Assurance Account   362,526 
Akorn, Inc.  Wilmington Savings Fund Society Bank  4323  Debtor in Possession / DACA   7,302,709 

 

MORPage 4 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 1a
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: August 1, 2020 - August 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   9/30/2020
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: August 1, 2020 - August 31, 2020

 

SCHEDULE OF RETAINED PROFESSIONAL FEES PAID

 

      Amount Paid   Cumulative Payments
Since Filing		 
Payee  Role of Professional  Fees   Expenses   Fees   Expenses 
KIRKLAND & ELLIS LLP1  DEBTORS' COUNSEL  $6,356   $-   $6,356   $- 
RICHARDS LAYTON & FINGER  DEBTORS' COUNSEL  $-   $-   $-   $- 
PJT PARTNERS  DEBTORS' INVESTMENT BANKER  $-   $-   $-   $- 
PRICEWATERHOUSECOOPERS CORPORATE FINANCE LLC  DEBTORS' INVESTMENT BANKER  $-   $-   $-   $- 
ALIXPARTNERS LLP1  DEBTORS' FINANCIAL ADVISOR  $32,813   $-   $32,813   $- 
GRANT THORNTON LLP  DEBTORS' FINANCIAL ADVISOR  $-   $-   $-   $- 
KURTZMAN CARSON CONSULTANTS INC2  DEBTORS' ADMINISTRATIVE ADVISOR  $-   $-   $53,226   $31,557 
JENNER & BLOCK  COMMITTEE COUNSEL  $-   $-   $-   $- 
SAUL EWING ARNSTEIN & LEHR  COMMITTEE COUNSEL  $-   $-   $-   $- 
HURON CONSULTING GROUP  COMMITTEE FINANCIAL ADVISOR  $-   $-   $-   $- 

 

Note:
[1] Fees paid in August to Kirkland & Ellis LLP & AlixPartners LLP are for services unrelated to their respective retentions under Section 327
[2] 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: August 1, 2020 - August 31, 2020

 

UNAUDITED

STATEMENT OF OPERATIONS (INCOME STATEMENT)

 

(Units in 000's)    
   Consolidated 
Net Revenue   47,785 
      
COGS   30,837 
      
Gross Profit   16,948 
      
SG&A   14,795 
Research & Development   2,693 
Amortization of Intangibles   2,051 
Goodwill Impairment   - 
Impairment of intangibles   - 
Litigation (Gain) Loss   - 
      
Operating Income   (2,591)
      
Interest expense, net   11,522 
Deferred Financing Costs   - 
Other   152,915 
Bankruptcy   5,681 
Income Tax   - 
      
Net Income   (172,709)

 

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: August 31, 2020

 

UNAUDITED

BALANCE SHEET  

 

(Units in 000's)    
   Consolidated 
Assets:    
Cash   53,934 
Accounts Receivable   151,457 
Accounts Receivable (intercompany)   1,528 
Inventory   177,660 
Other   76,267 
Other (Intercompany Loan - AG)   1,830 
Current Assets   462,676 
      
PP&E, Net   214,846 
Goodwill   - 
Product License Rights   199,005 
Other   30,170 
Long-term Assets   72,278 
      
Total Assets   978,975 
      
Liabilities:     
      
Liabilities Subject to Compromise   74,153 
Accounts Payable   41,433 
Accounts Payable (Intercompany)   3,060 
Income Taxes Payable   (10)
Accrued Royalties   3,684 
Accrued Compensation   17,523 
Other Current Liabilities   89,001 
Current Portion of LTD   856,369 
Current Liabilities   1,011,060 
      
Long-term Debt   - 
Other   2,741 
Long-term Liabilities   2,741 
      
Total Liabilities   1,087,954 
      
Shareholders' Equity:     
      
Common Stock   610,156 
Retained Earnings   (719,098)
Accumulated Other Comprehensive Loss   (37)
Total Shareholders' Equity   (108,979)
      
Liabilities & Shareholders' Equity:   978,975 

 

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: August 1, 2020 - August 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     9/30/2020
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: August 31, 2020

 

ACCOUNTS PAYABLE AGING

 

As of August 31, 2020   Current    0-30 Days    31 - 60 Days    61 - 90 Days    >90 Days    Total 
Accounts Payables  $25,116,609    $11,743,294    $2,085,822    $443,019    $2,044,256    $41,433,000  
Percentage of Total   61%   28%   5%   1%   5%   100%

 

MORPage 10 of 12 

 

 

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

 

As of August 31, 2020  Current   0-30 Days   31 - 60 Days   61 - 90 Days   > 90 Days   Total 
Gross Accounts Receivables  $225,831,181    $5,067,502    $20,314,175    $114,742,688    $31,721,799    $397,677,344  
Percentage of Total   57%   1%   5%   29%   8%   100%

 

Gross to Net Accounts Receivable as of August 31, 2020  Amount 
Total Gross Accounts Receivable at the end of the reporting period   397,677,344  
- Reserves for: Chargebacks, Rebates, Other   (246,220,463)
Total Net Accounts Receivable at the end of the reporting period   151,456,880  

  

MORPage 11 of 12 

 

 

In re Akorn, Inc., et al.   MOR - 6
        Debtors Case No. (Jointly Administered): 20-11177
  Reporting Period: August 1, 2020 - August 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.  X1 
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

 

Note:
[1] Pursuant to Order (I) Authorizing the Sale of Certain Equity Interests in Non-Debtor Akorn India Private Limited Pursuant to  11 U.S.C. § 363 of the Bankruptcy Code, (II) Authorizing the Retention and Employment of PricewaterhouseCoopers Corporate Finance LLC in Connection Therewith, Effective as of the Petition Date, and (III) Granting Related Relief [Docket No. 365], the sale of Akorn India Private Limited was closed on 8/14/2020.

 

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