FOR THE DISTRICT OF DELAWARE
) | ||||||||
In re: | ) | Chapter 11 | ||||||
) | ||||||||
AAIPHARMA INC.,et al., | ) | Case Nos. 05-11341 through 05-11345 and | ||||||
) | 05-11347 through 05-11350 (PJW) | |||||||
Debtors. | ) | |||||||
) | Jointly Administered | |||||||
) | ||||||||
FIRST AMENDED JOINT CHAPTER 11 PLAN
December 5, 2005
RICHARDS, LAYTON & FINGER, P.A. | FRIED, FRANK, HARRIS, SHRIVER | |||||
One Rodney Square | & JACOBSON LLP | |||||
920 North King Street | One New York Plaza | |||||
Wilmington, Delaware 19801 | New York, New York 10004-1980 | |||||
Attn: | Mark D. Collins, Esq. | Attn: | Bonnie Steingart, Esq. | |||
Rebecca L. Booth, Esq. | Gary L. Kaplan, Esq. | |||||
Karen M. McKinley, Esq. | Arik Preis, Esq. | |||||
Tel: | (302) 651-7700 | Tel: | (212) 859-8000 | |||
Fax: | (302) 651-7701 | Fax: | (212) 859-4000 |
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ARTICLE I. INTRODUCTION AND SUMMARY | 13 | |||||
1.01 | The Solicitation | 13 | ||||
1.02 | Recommendations | 14 | ||||
1.03 | Summary of Key Provisions of the Plan | 14 | ||||
1.04 | Summary of Classifications and Treatment of Claims and Old Equity Interests | 16 | ||||
1.05 | Conditions of Consummation of Plan | 21 | ||||
ARTICLE II. DEFINITIONS | 21 | |||||
ARTICLE III. BACKGROUND | 33 | |||||
3.01 | Debtors’ Business | 33 | ||||
3.02 | Pre-Petition Financing | 35 | ||||
3.03 | Events Preceding Commencement of the Chapter 11 Cases | 36 | ||||
3.04 | Pending Litigation | 41 | ||||
ARTICLE IV. DESCRIPTION OF CHAPTER 11 CASES | 44 | |||||
4.01 | First Day Motions | 44 | ||||
4.02 | Schedules & Statement of Financial Affairs | 45 | ||||
4.03 | Appointment of Creditors’ Committee | 46 | ||||
4.04 | The DIP Financing Facility | 47 | ||||
4.05 | Bidding Procedures and Sale Motion | 47 | ||||
4.06 | The Request for an Equity Committee | 48 | ||||
4.07 | Key Employee Retention Program | 49 | ||||
4.08 | Stipulation with Cardinal Health | 49 | ||||
4.09 | Bar Dates | 50 | ||||
ARTICLE V. EVENTS LEADING TO FORMULATION OF THE PLAN | 51 | |||||
5.01 | Development of the Business Plan | 51 | ||||
5.02 | Retention of Chanin | 51 |
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5.03 | Negotiations Among the Debtors, the Ad Hoc Committee of Secured Noteholders, and the Creditors’ Committee | 52 | ||||
ARTICLE VI. SUMMARY OF THE PLAN | 53 | |||||
6.01 | General | 54 | ||||
6.02 | Voting on the Plan | 54 | ||||
6.03 | Classification and Treatment of Claims and Old Equity Interests Under the Plan | 55 | ||||
ARTICLE VII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES | 60 | |||||
7.01 | Assumption and Rejection of Executory Contracts and Unexpired Leases | 60 | ||||
7.02 | Cure of Defaults | 60 | ||||
7.03 | Bar Date for Rejection Damages | 60 | ||||
7.04 | Employee Benefit Plans | 61 | ||||
ARTICLE VIII. IMPLEMENTATION OF THE PLAN | 61 | |||||
8.01 | Vesting of Property | 61 | ||||
8.02 | Substantive Consolidation | 61 | ||||
8.03 | Retention, Enforcement and Release of Causes of Action | 63 | ||||
8.04 | Implementation | 65 | ||||
8.05 | New Credit Facility | 65 | ||||
8.06 | Corporate Action | 65 | ||||
8.07 | Issuance of New Securities | 65 | ||||
8.08 | Stockholder and Registration Rights Agreements | 66 | ||||
8.09 | Cancellation of Existing Securities and Agreements | 66 | ||||
8.10 | Dissolution | 66 | ||||
8.11 | Amended and Restated Certificates of Incorporation; Amended and Restated By-Laws | 66 | ||||
8.12 | Directors and Officers of the Reorganized Debtors | 66 | ||||
8.13 | Management Agreements | 67 | ||||
8.14 | Transactions on Business Days | 67 |
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8.15 | Termination of DIP Financing Agreement | 67 | ||||
8.16 | Ordinary Course Refunds | 67 | ||||
ARTICLE IX. LITIGATION LLC | 68 | |||||
9.01 | Establishment of the Litigation LLC; Funding | 68 | ||||
9.02 | Transfer of Designated Litigation to the Litigation LLC | 68 | ||||
9.03 | Litigation LLC Interests; Term | 70 | ||||
9.04 | Procedures for Distribution | 70 | ||||
9.05 | Annual Distribution; Withholding | 70 | ||||
9.06 | Litigation; Responsibilities of Litigation Manager | 70 | ||||
ARTICLE X. DISTRIBUTIONS UNDER THE PLAN | 71 | |||||
10.01 | Timing of Distributions Under the Plan | 71 | ||||
10.02 | Payments and Distributions with Respect to Disputed Claims | 71 | ||||
10.03 | Allocation of Consideration | 72 | ||||
10.04 | Cash Payments | 72 | ||||
10.05 | Payment of Statutory Fees | 72 | ||||
10.06 | No Interest | 72 | ||||
10.07 | Setoffs | 72 | ||||
10.08 | Special Provision Regarding Unimpaired Claims | 73 | ||||
10.09 | Fractional Securities | 73 | ||||
10.10 | Compliance with Tax Requirements | 73 | ||||
10.11 | Persons Deemed Holders of Registered Securities; Distribution Record Date | 73 | ||||
10.12 | Surrender of Existing Securities | 74 | ||||
10.13 | Undeliverable or Unclaimed Distributions | 74 | ||||
10.14 | Distributions on Account of Senior Secured Notes | 74 | ||||
10.15 | Exemption From Certain Transfer Taxes | 75 | ||||
10.16 | Rule 9019 Settlement and Compromise of Disputes Between the Debtors, Holders of Senior Secured Note Claims and Holders of General Unsecured Claims | |||||
75 |
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ARTICLE XI. PLAN ADMINISTRATION | 75 | |||||
11.01 | Duties | 75 | ||||
11.02 | Funding | 76 | ||||
11.03 | Distributions | 76 | ||||
11.04 | Retention of Professionals | 76 | ||||
11.05 | Succession | 76 | ||||
11.06 | Cooperation | 76 | ||||
11.07 | Failure by Class 4 to Accept the Plan | 77 | ||||
ARTICLE XII. PROVISIONS FOR TREATMENT OF DISPUTED GENERAL UNSECURED CLAIMS | 77 | |||||
12.01 | Objections to General Unsecured Claims; Disputed General Unsecured Claims | 77 | ||||
12.02 | Estimation of General Unsecured Claims | 77 | ||||
12.03 | Timing of Payments and Distributions With Respect to Disputed General Unsecured Claims | 77 | ||||
12.04 | General Unsecured Claims Reserve | 78 | ||||
12.05 | Distributions After Allowance of Disputed General Unsecured Claims | 78 | ||||
12.06 | Distributions After Disallowance of Disputed General Unsecured Claims | 79 | ||||
ARTICLE XIII. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS OTHER THAN GENERAL UNSECURED CLAIMS | 79 | |||||
13.01 | Objections to Claims; Disputed Claims | 79 | ||||
13.02 | Estimation of Claims | 79 | ||||
13.03 | Timing of Payments and Distributions with Respect to Disputed Claims other than General Unsecured Claims | 80 | ||||
13.04 | Distributions After Allowance of Disputed Claims other than General Unsecured Claims | 80 | ||||
13.05 | Prosecution of Objections | 80 | ||||
ARTICLE XIV. DISCHARGE, INJUNCTIONS, RELEASES AND SETTLEMENT OF CLAIMS | 81 | |||||
14.01 | Discharge of all Claims and Old Equity Interests and Releases | 81 |
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PAGE | ||||||
14.02 | Exculpation | 83 | ||||
14.03 | Injunction | 84 | ||||
14.04 | Guarantees and Claims of Subordination | 84 | ||||
14.05 | Survival of Indemnification Obligations | 85 | ||||
14.06 | Cooperation with Litigation Manager | 85 | ||||
ARTICLE XV. CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE | 86 | |||||
15.01 | Conditions to Confirmation | 86 | ||||
15.02 | Conditions to Effective Date | 86 | ||||
15.03 | Waiver of Conditions | 87 | ||||
15.04 | Effect of Failure of Conditions | 87 | ||||
ARTICLE XVI. MISCELLANEOUS PROVISIONS OF THE PLAN | 87 | |||||
16.01 | Retention of Jurisdiction | 87 | ||||
16.02 | Binding Effect | 89 | ||||
16.03 | Authorization of Corporate Action | 89 | ||||
16.04 | Modification of the Plan | 89 | ||||
16.05 | Withdrawal of the Plan | 89 | ||||
16.06 | Nonvoting Stock | 89 | ||||
16.07 | Dissolution of any Committee | 89 | ||||
16.08 | Section 1125(e) of the Bankruptcy Code | 90 | ||||
16.09 | Post-Confirmation Obligations | 90 | ||||
ARTICLE XVII. CERTAIN FACTORS | 90 | |||||
17.01 | Certain Bankruptcy Law Considerations | 90 | ||||
17.02 | Risks Related to the Debtors’ Business | 94 | ||||
17.03 | Factors Affecting the Value of the Securities | 96 | ||||
ARTICLE XVIII. APPLICATION OF SECURITIES ACT | 98 | |||||
18.01 | Issuance and Resale of New Securities Under the Plan | 98 |
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18.02 | New Common Stock | 99 | ||||
ARTICLE XIX. FINANCIAL PROJECTIONS, VALUATION AND ASSUMPTIONS USED | 100 | |||||
19.01 | Valuation of aaiPharma | 100 | ||||
19.02 | Financial Projections | 103 | ||||
ARTICLE XX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES | 109 | |||||
20.01 | Federal Income Tax Consequences to the Debtors | 111 | ||||
20.02 | Federal Income Tax Consequences of the Plan to U.S. Holders of Senior Secured Note Claims | 113 | ||||
20.03 | Federal Income Tax Consequences to U.S. Holders of General Unsecured Claims | 116 | ||||
20.04 | Consequences of Owning Litigation LLC Interests and Tax Treatment of the Litigation LLC | 116 | ||||
20.05 | Federal Income Tax Consequences of Ownership and Disposition of New Common Stock | 118 | ||||
20.06 | Information Reporting and Backup Withholding | 118 | ||||
ARTICLE XXI. ACCEPTANCE AND CONFIRMATION OF THE PLAN | 119 | |||||
21.01 | Solicitation of Acceptance | 119 | ||||
21.02 | Confirmation Hearing | 119 | ||||
21.03 | Requirements for Confirmation of the Plan | 120 | ||||
21.04 | Confirmation of the Plan under Section 1129(b) | 120 | ||||
21.05 | No Unfair Discrimination | 121 | ||||
21.06 | Fair and Equitable Test | 121 | ||||
21.07 | Best Interests Test | 122 | ||||
21.08 | Feasibility | 124 | ||||
ARTICLE XXII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN | 125 | |||||
22.01 | Liquidation Under Chapter 7 of the Bankruptcy Code | 125 | ||||
22.02 | Alternative Plan | 126 | ||||
ARTICLE XXIII. OBJECTIONS AND ADDITIONAL DISCLOSURE | 126 |
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ARTICLE XXIV. THE BANKRUPTCY PLAN—VOTING INSTRUCTIONS AND PROCEDURES | 130 | |||||
24.01 | General | 130 | ||||
24.02 | Voting Deadline | 130 | ||||
24.03 | Holders of Claims Entitled to Vote | 131 | ||||
24.04 | Vote Required for Acceptance by a Class | 131 | ||||
24.05 | Voting Procedures | 132 | ||||
ARTICLE XXV. CONCLUSION AND RECOMMENDATION | 135 | |||||
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APPENDIX A — | FINANCIAL PROJECTIONS | |
APPENDIX B — | LIQUIDATION ANALYSIS | |
APPENDIX C — | FIRST AMENDED JOINT CHAPTER 11 PLAN | |
APPENDIX D — | AAIPHARMA INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 | |
APPENDIX E — | AAIPHARMA INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005 | |
APPENDIX F — | AAIPHARMA INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005 | |
APPENDIX G — | STATEMENT OF THE AD HOC COMMITTEE OF SECURED NOTEHOLDERS IN SUPPORT OF THE PLAN | |
APPENDIX H — | STATEMENT OF THE CREDITORS’ COMMITTEE IN SUPPORT OF THE PLAN | |
APPENDIX I — | POSITION STATEMENT OF DR. FREDERICK D. SANCILIO | |
APPENDIX J — | DEBTORS’ RESPONSE TO POSITION STATEMENT OF DR. FREDERICK D. SANCILIO | |
APPENDIX K — | DEBTORS’ MONTHLY OPERATING REPORT FOR THE MONTHLY PERIOD OCTOBER 1, 2005 THROUGH OCTOBER 31, 2005 |
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INTRODUCTION AND SUMMARY
RICHARDS, LAYTON & FINGER, P.A. | FRIED, FRANK, HARRIS, SHRIVER | |||||
One Rodney Square | & JACOBSON LLP | |||||
920 North King Street | One New York Plaza | |||||
Wilmington, Delaware 19801 | New York, New York 10004-1980 | |||||
Attn: | Mark D. Collins, Esq. | Attn: | Bonnie Steingart, Esq. | |||
Rebecca L. Booth, Esq. | Gary L. Kaplan, Esq. | |||||
Karen M. McKinley, Esq. | Arik Preis, Esq. | |||||
Tel: | (302) 651-7700 | Tel: | (212) 859-8000 | |||
Fax: | (302) 651-7701 | Fax: | (212) 859-4000 |
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1. | the Plan provides the best possible result for the Holders of Claims; | ||
2. | with respect to each Impaired Class of Claims, the distributions under the Plan, if any, are not less than the amounts that would be received if the Debtors were liquidated under chapter 7 of the Bankruptcy Code; | ||
3. | acceptance of the Plan is in the best interests of Holders of Claims. |
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Class | Type of Claim or Interest | Treatment | ||
Not Applicable | Administrative Expenses | The Debtors or the Reorganized Debtors, as the case may be, will pay each Allowed Administrative Expense in full, in Cash, on the later of (a) the Effective Date (or as soon thereafter as is practicable), (b) the date on which the Bankruptcy Court enters an order allowing such Administrative Expense, or (c) such other date to which the Reorganized Debtors and the Holder of the Allowed Administrative Expense otherwise agree;provided,however, that Allowed Administrative Expenses representing (a) obligations incurred in the ordinary course of business or assumed by the Debtors or the Reorganized Debtors, as the case may be, will be paid in full or performed by the Debtors or Reorganized Debtors, as the case may be, in the ordinary course of business, consistent with past practice and (b) obligations incurred to Professionals for services provided through the Confirmation Date will be paid in accordance with the applicable Court order approving the fees and expenses of each such Professional;provided,further,however, that Allowed Administrative Expenses incurred by the Debtors or the Reorganized Debtors, as the case may be, after the Confirmation Date, including claims for Professionals’ fees and expenses, will not require application to the Court and will be paid by the Debtors or Reorganized Debtors, |
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Class | Type of Claim or Interest | Treatment | ||
as the case may be, in the ordinary course of business and without further Court approval. All applications for final allowance of compensation and reimbursement of expenses will be subject to the authorization and approval of the Bankruptcy Court. Any objections to such applications shall be filed no later than twenty (20) days following the date on which a final fee application is filed with the Court. All Obligations (as such term is defined in the DIP Financing Agreement) payable under the DIP Financing Agreement and all other DIP Lender Claims, including any Claims for reimbursement of expenses and fees of professionals employed by the DIP Lenders shall constitute Allowed Administrative Expenses and shall be paid in full, in cash, on the Effective Date without any setoff, defenses or counterclaims without the need for application to or approval from the Court. All Indenture Trustee’s Fees and Expenses and/or Senior Secured Noteholder Fees (as such term is defined in the Final DIP Financing Order) shall constitute Allowed Administrative Expenses and shall be paid in full in cash on the Effective Date, without any setoffs, defenses or counterclaims and without the need for application to, or approval of, any court. | ||||
Not Applicable | Priority Tax Claims (approximately $752,000 claimed)1 | With respect to each Allowed Priority Tax Claim, at the sole option of the Debtors, each Holder of an Allowed Priority Tax Claim shall be entitled to receive from the Reorganized Debtors on account of such Claim: (i) Cash payments made in equal annual installments beginning on or before the first anniversary following the Effective Date with the final installment being payable no later than the sixth |
1 | Tax Claims have not been reconciled by the Debtors to date. Further, as certain entities have filed motions requesting an extension of the Governmental Unit Bar Date, the number and dollar amount of Priority Tax Claims is subject to change. The estimated amount of $752,000 includes approximately $564,000 in Proofs of Claim filed, $42,000 listed in Schedule E Priority Claims as set forth in the Schedules, and approximately $146,000 of Claims that the Debtors believe may be misclassified. |
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Class | Type of Claim or Interest | Treatment | ||
anniversary of the date of the assessment of such Allowed Priority Tax Claim, together with interest on the unpaid balance of such Allowed Priority Tax Claim from the Effective Date calculated at the Market Rate; or (ii) such other treatment agreed to by each Holder of such Allowed Priority Tax Claim and the Debtors or Reorganized Debtors, as the case may be. | ||||
Class 1 | Priority Claims (other than Administrative Expenses and Priority Tax Claims)2 (approximately $1,630,000.00 claimed)3 (approximately $52,000 estimated)4 | Unimpaired. On the latest of (a) the Effective Date (or as soon as practicable thereafter), (b) the date on which such Priority Claim becomes an Allowed Priority Claim, or (c) such other date on which the Debtors and the Holder of such Allowed Priority Claim otherwise may agree, each Holder of an Allowed Priority Claim shall be entitled to receive Cash in an amount sufficient to render such Allowed Priority Claim Unimpaired under section 1124 of the Bankruptcy Code. | ||
Class 2 | Miscellaneous Secured Claims5 (approximately $2,900,000 claimed ) (approximately $1,300,000 estimated)6 | Unimpaired. On the Effective Date, at the sole option of the Debtors, (i) the legal, equitable and contractual rights to which the Miscellaneous Secured Claim entitles the Holder of such Claim will remain unaltered, and the Holder of such Claim shall retain any Liens and/or security interests securing such Claim, or (ii) the Debtors will provide other treatment that will render such Miscellaneous Secured Claim Unimpaired under section 1124 of the Bankruptcy Code. |
2 | Other Priority Claims have not been reconciled by the Debtors. | |
3 | The filed Proofs of Claim consist of all docketed Priority Claims less Priority Tax Claims. | |
4 | The estimate for Priority Claims represents estimated Other Priority Claims Allowed less Claim amounts filed as Priority which the Debtors expect to be (x) reclassified as General Unsecured or (y) expunged. | |
5 | Miscellaneous Secured Claims have not been reconciled by the Debtors to date, and do not include Tax Claims filed as Secured Claims. | |
6 | The estimate for Miscellaneous Secured Claims represents total filed Secured Proofs of Claim minus any Claims that the Debtors expect to be reclassified under the Plan. |
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Class | Type of Claim or Interest | Treatment | ||
Class 3 | Senior Secured Note Claims ($187,811,020.83) | Impaired. The Senior Secured Note Claims are Allowed in the amount of $187,811,020.83, without avoidance, setoff, subordination, any defenses, counterclaims, or any other reduction of any kind. On the Effective Date, in full satisfaction, release, and discharge of, and in exchange for, all Allowed Senior Secured Note Claims, each Holder of an Allowed Senior Secured Note Claim shall be entitled to receive (a) its Pro Rata share of the Senior Secured Note Distribution and (b) to the extent unpaid, payment in cash in full of all Indenture Trustee’s Fees and Expenses and/or Senior Secured Noteholder Fees (as such term is defined in the Final DIP Financing Order). | ||
Subject to the occurrence of the Effective Date, if Class 4 votes to accept the Plan, each Holder of a Senior Secured Note Claim and the Indenture Trustee will be deemed to waive any unsecured Claim that may arise from the Liens in favor of the Holders of Senior Secured Notes proving insufficient to cover the Allowed Senior Secured Note Claims. As such, subject to the occurrence of the Effective Date and if Class 4 votes to accept the Plan, Holders of Senior Secured Note Claims will not share in the General Unsecured Cash Amount and shall not be Litigation LLC Interest Holders. | ||||
Class 4 | General Unsecured Claims (approximately $65,893,000.00 claimed)7 (approximately $25-40 million estimated) | Impaired. Pursuant to the terms of a settlement between the Debtors, the Holders of Senior Secured Note Claims and the Holders of General Unsecured Claims, and provided that Class 4 votes to accept the Plan, as soon as practicable following the earlier of (i) the Initial Distribution Date and (ii) the date on which all Disputed General Unsecured |
7 | This amount includes $65,014,000 of Claims, some of which the Debtors believe are misclassified, and a net adjusted unclaimed amount of $879,000 as set forth in the Schedules. On November 29, 2005, the Debtors filed their first omnibus non-substantive objection to claims to disallow and expunge (a) duplicate Claims, (b) Claims filed against the incorrect Debtor entity, (c) amended and superseded Claims and (d) late filed Claims. Pursuant to that objection, the Debtors are seeking to expunge a total of $4,115,200.39 in Claims. A hearing on this objection is scheduled for December 29, 2005. The Debtors can make no assurance that they will be successful in expunging any or all of these Claims. |
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Class | Type of Claim or Interest | Treatment | ||
Claims have been resolved by Final Order of the Court, each Holder of an Allowed General Unsecured Claim shall receive its Pro Rata share of (x) the General Unsecured Cash Amount and (y) the Litigation LLC Interests in accordance with sections 13.05 and 13.06 of the Plan. | ||||
Class 5 | Convenience Claims (approximately $14,000.00)8 | Unimpaired. On the Effective Date (or as soon as practicable thereafter) each Holder of an Allowed Convenience Claim, including Holders of General Unsecured Claims who have elected to reduce such General Unsecured Claim to $250 by an irrevocable written election pursuant to such Holders’ Ballot, shall receive Cash in an amount sufficient to render such Allowed Convenience Claim Unimpaired under section 1124 of the Bankruptcy Code. | ||
Class 6 | 510(b) Note Claims | Impaired. On the Effective Date, all 510(b) Note Claims will be extinguished and no distributions will be made to Holders of 510(b) Note Claims. | ||
Class 7 | Old Equity Interests | Impaired. On the Effective Date, all Old Equity Interests will be extinguished and no distributions will be made to Holders of Old Equity Interests. |
8 | The estimated value of Class 5 Convenience Claims only includes Claims (i) that are listed on the Debtors’ Schedules as neither disputed, contingent, or unliquidated and in an amount of $250 or less or (ii) for which a Proof of Claim was filed with respect to such Claim in an amount of $250 or less. The estimated value of Class 5 Convenience Claims does not include Claims of Holders of Class 4 General Unsecured Claims that may elect to reduce their Claim so as to receive Class 5 Convenience Claim treatment. |
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(i) | The Confirmation Order shall be in form and substance acceptable to the Ad Hoc Committee of Secured Noteholders and the Creditors’ Committee; | ||
(ii) | The Debtors must have received a firm written commitment for the New Credit Facility; | ||
(iii) | The Confirmation Order shall have become a Final Order; | ||
(iv) | Provided that Class 4 votes to accept the Plan, the Debtors or the Reorganized Debtors, as the case may be, must have deposited the General Unsecured Cash Amount in the General Unsecured Claim Reserve; | ||
(v) | Provided that Class 4 votes to accept the Plan, the Debtors or the Reorganized Debtors, as the case may be, must have deposited the Claims Objection Fund into a segregated interest bearing account in the name and under the control of the Plan Administrator; | ||
(vi) | The New Common Stock must have been issued to the Indenture Trustee in accordance with the Plan; | ||
(vii) | All authorizations, consents and regulatory approvals in connection with the consummation of the Plan shall have been obtained and not revoked; and | ||
(viii) | All New Credit Facility Documents shall have been executed and, if applicable, all conditions to the New Credit Facility’s effectiveness, other than the occurrence of the Effective Date, must have been satisfied or waived (such waiver requiring the consent of the Ad Hoc Committee of Secured Noteholders, which consent shall not be unreasonably delayed, conditioned or withheld) pursuant to the terms thereof. |
DEFINITIONS
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BACKGROUND
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9 | The Debtors believe that the claims asserted in the securities litigation and the ERISA litigation are claims of the type described in, and subject to, subordination under section 510(b) of the Bankruptcy Code. As such, the claims asserted against the Debtors in those litigations are treated as Old Equity Interests under the Plan, and will receive the treatment afforded to Old Equity Interests set forth in the Plan. | |
10 | The stockholder derivative action is a Cause of Action belonging to the Debtors and will be released by the Debtors pursuant to the terms of the Plan. |
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DESCRIPTION OF CHAPTER 11 CASES
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1300 Morris Drive
Chesterbrook, Pennsylvania 19087
Chair
900 Ridgeway Road
Ridgefield, Connecticut 06877
59 Route 10
East Hanover, New Jersey 07936
15 Hawkins Avenue
Capetown, South Africa
622 Third Avenue
New York, New York 10017
1201 Market Street, Suite 1500
Wilmington, Delaware 19801
Attn: Kurt F. Gwynne, Esq.
1650 Market Street
Philadelphia, Pennsylvania 19103
Attn: Claudia Z. Springer, Esq.
Attorneys for the Creditors’ Committee
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333 Thornall Street
Edison, New Jersey 08837
Attn: Bernard A. Katz
Accountants and Financial Advisors to the Creditors’ Committee
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11 | The Creditors’ Committee also stated in their response that Dr. Sancilio could seek reimbursement under section 503 of the Bankruptcy Code for professional fees and expenses that he is incurring in his efforts to find a recovery for equity holders, if those efforts prove successful and result in a benefit to the estate. |
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EVENTS LEADING TO FORMULATION OF THE PLAN
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5.03 | Negotiations Among the Debtors, the Ad Hoc Committee of Secured Noteholders, and the Creditors’ Committee |
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SUMMARY OF THE PLAN
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EXECUTORY CONTRACTS AND UNEXPIRED LEASES
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IMPLEMENTATION OF THE PLAN
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LITIGATION LLC
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DISTRIBUTIONS UNDER THE PLAN
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10.16 | Rule 9019 Settlement and Compromise of Disputes Between the Debtors, Holders of Senior Secured Note Claims and Holders of General Unsecured Claims |
PLAN ADMINISTRATION
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PROVISIONS FOR TREATMENT OF DISPUTED GENERAL UNSECURED CLAIMS
12.03 | Timing of Payments and Distributions With Respect to Disputed General Unsecured Claims |
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PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS OTHER THAN GENERAL UNSECURED CLAIMS
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13.03 | Timing of Payments and Distributions with Respect to Disputed Claims other than General Unsecured Claims |
13.04 | Distributions After Allowance of Disputed Claims other than General Unsecured Claims |
13.05 | Prosecution of Objections |
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DISCHARGE, INJUNCTIONS, RELEASES AND SETTLEMENT OF CLAIMS
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CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE
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MISCELLANEOUS PROVISIONS OF THE PLAN
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CERTAIN FACTORS
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12 | On November 29, 2005, the Debtors filed their first omnibus non-substantive objection to claims to disallow and expunge (a) duplicate Claims, (b) Claims filed against the incorrect Debtor entity, (c) amended and superseded Claims and (d) late filed Claims. Pursuant to that objection, the Debtors are seeking to expunge a total of $4,115,200.39 in Claims. A hearing on this objection is scheduled for December 29, 2005. The Debtors can make no assurance that they will be successful in expunging any or all of these Claims. |
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(vii) | Holders of General Unsecured Claims May Receive No Distribution on Account of Their Litigation LLC Interests |
(viii) | Parties May be Permitted to File Additional Proofs of Claim That May Result in Holders of Allowed General Unsecured Claims Receiving Significantly Less than Expected. |
(i) | The Reorganized Debtors May Incur Significant Financial Liability with Respect to their Brethine Product Line |
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(ii) | The Reorganized Debtors May Not Receive Royalty Payments Pursuant to the Purchase Agreement |
(iii) | The Debtors are Unable to Predict the Outcome of the Investigations Being Conducted by Certain Governmental Units |
-95-
17.03 | Factors Affecting the Value of the Securities |
(i) | The Projections set forth in this Disclosure Statement May Not be Achieved |
(ii) | The New Credit Agreement May Impose Restrictions on Reorganized aaiPharma’s Businesses |
-96-
(iii) | There is No Public Market for the New Common Stock and Reorganized aaiPharma Will Not Assure Any of the Holders of the Pre-Petition Senior Secured Note Claims That a Market for Any of the New Common Stock Will Develop |
(iv) | Reorganized aaiPharma’s Ability to Pay Any Dividends on the New Common Stock will be Limited |
-97-
APPLICATION OF SECURITIES ACT
(i) | Section 1145 of the Bankruptcy Code |
-98-
-99-
FINANCIAL PROJECTIONS, VALUATION AND ASSUMPTIONS USED
13 | Further information regarding the Debtors’ historical financial information, as well as business, is set forth in aaiPharma’s Form 10-K for the fiscal year ended December 31, 2004, aaiPharma’s Form 10-Q for the quarterly period ended September 30, 2005, and aaiPharma’s Form 10-Q for the quarterly period ended June 30, 2005 which are attached to this Disclosure Statement as Appendices D, E, and F, respectively. |
-100-
-101-
-102-
-103-
-104-
(i) | Summary of Significant Assumptions |
-105-
(ii) | Statement of Operations Assumptions |
-106-
(iii) | Balance Sheet Assumptions |
14 | In preparing the Projections, the Debtors have treated taxable income on a worldwide consolidated basis and have assumed (i) a 40% statutory tax rate and (ii) the applicability of all net operating losses in accordance with section 382 of the Internal Revenue Code. |
-107-
-108-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
-109-
• | a citizen or resident of the United States; | ||
• | a corporation organized in or under the laws of the United States or any political subdivision thereof; | ||
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | ||
• | a trust if, (i) the trust is subject to the supervision of a court within the United States and the control of one or more “United States persons” as described in section 7701(a)(30) of the Tax Code or (ii) the trust has a valid election in effect under applicable U.S. Regulations to be treated as a “United States person.” |
-110-
20.01 | Federal Income Tax Consequences to the Debtors |
(i) | Cancellation of Indebtedness and Reduction of Tax Attributes |
(ii) | Section 382 Limitations on NOLs |
-111-
(iii) | Special Bankruptcy Exception |
-112-
(iv) | Alternative Minimum Tax |
(v) | Establishment of Litigation LLC |
20.02 | Federal Income Tax Consequences of the Plan to U.S. Holders of Senior Secured Note Claims |
-113-
-114-
(i) | Market Discount |
-115-
(ii) | Allocation of Consideration Received |
(iii) | Claims for Accrued Interest |
20.03 | Federal Income Tax Consequences to U.S. Holders of General Unsecured Claims |
20.04 | Consequences of Owning Litigation LLC Interests and Tax Treatment of the Litigation LLC |
-116-
-117-
20.05 | Federal Income Tax Consequences of Ownership and Disposition of New Common Stock |
(i) | Distributions |
(ii) | Dispositions of the New Common Stock |
20.06 | Information Reporting and Backup Withholding |
-118-
ACCEPTANCE AND CONFIRMATION OF THE PLAN
21.01 | Solicitation of Acceptance |
Class 4 — General Unsecured Claims.
21.02 | Confirmation Hearing |
-119-
21.03 | Requirements for Confirmation of the Plan |
21.04 | Confirmation of the Plan under Section 1129(b) |
-120-
21.05 | No Unfair Discrimination |
21.06 | Fair and Equitable Test |
(i) | Secured Claims |
-121-
(ii) | Unsecured Claims |
(iii) | Equity Interests |
21.07 | Best Interests Test |
-122-
-123-
21.08 | Feasibility |
-124-
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION
OF THE PLAN
22.01 | Liquidation Under Chapter 7 of the Bankruptcy Code |
-125-
22.02 | Alternative Plan |
OBJECTIONS AND ADDITIONAL DISCLOSURE
-126-
-127-
-128-
Unsecured | Unsecured | |||||||||||||||||||
Total | Total | Secured | Priority | Nonpriority | ||||||||||||||||
Debtor | Assets | Liabilities | Claims15 | Claims | Claims | |||||||||||||||
aaiPharma, Inc. | $ | 82,116,963.00 | 16 | $ | 427,862,390.13 | 17 | $ | 187,811,310.13 | $ | 38,390.00 | $ | 240,012,690.00 | 18 | |||||||
aaiPharma, LLC | $ | 95,300,000.00 | 19 | $ | 203,855,577.80 | 20 | $ | 187,811,310.13 | $ | 0 | $ | 16,044,267.67 | 21 | |||||||
Applied Analytical Industries Learning Center, Inc. | $ | 911,422.71 | $ | 189,116,594.08 | 22 | $ | 187,811,310.13 | $ | 642.03 | $ | 1,304,641.92 | 23 | ||||||||
AAI Japan, Inc. | $ | 105,355.30 | $ | 190,637,125.47 | 24 | $ | 187,811,310.13 | $ | 0 | $ | 2,825,815.34 | 25 | ||||||||
AAI Dev. Serv., Inc. (Mass.) | $ | 25,734,803.20 | 26 | $ | 190,138,542.03 | 27 | $ | 187,811,310.13 | $ | 3,378.44 | $ | 2,323,853.46 | 28 | |||||||
AAI Tech., Inc. | $ | 73,819,326.62 | 29 | $ | 187,811,310.13 | $ | 187,811,310.13 | $ | 0 | $ | 0 | |||||||||
Kansas City Analytical Serv., Inc. | $ | 0 | $ | 187,811,310.13 | $ | 187,811,310.13 | $ | 0 | $ | 0 | ||||||||||
AAI Properties, Inc. | $ | 58,274,855.3130 | $ | 187,811,310.13 | $ | 187,811,310.13 | $ | 0 | $ | 0 | ||||||||||
AAI Dev. Serv., Inc. (Del.) | $ | 0 | $ | 187,811,310.13 | $ | 187,811,310.13 | $ | 0 | $ | 0 |
15 | Does not include $179,831,313.99 owed under Pre-Petition Credit Agreement, which has been repaid from the proceeds of the DIP Financing Facility. | |
16 | Includes net intercompany asset of approximately $16,100,000.00 | |
17 | Includes net intercompany liability of approximately $237,800,000.00 | |
18 | Includes net intercompany liability of approximately $237,800,000.00 | |
19 | Includes net intercompany asset of approximately $95,300,000.00. The Schedules listed assets of approximately $310,000,000 for aaiPharma LLC, but the majority of these assets were sold as part of the Sale Transaction. | |
20 | Includes net intercompany liability of approximately $12,300,000.00 | |
21 | Includes net intercompany liability of approximately $12,300,000.00 | |
22 | Includes net intercompany liability of approximately $1,304,641.92 | |
23 | Denotes net intercompany liability of approximately $1,304,641.92 | |
24 | Includes net intercompany liability of approximately $2,825,815.34 | |
25 | Denotes net intercompany liability of approximately $2,825,815.34 | |
26 | Includes net intercompany asset of approximately $17,700,000. | |
27 | Includes net intercompany liability of approximately $2,000,000. | |
28 | Includes net intercompany liability of approximately $2,000,000. | |
29 | Denotes net intercompany asset of $73,819,326.62. | |
30 | Denotes net intercompany asset of $58,274,855.31. |
-129-
THE BANKRUPTCY PLAN—VOTING INSTRUCTIONS AND PROCEDURES
24.01 | General |
24.02 | Voting Deadline |
BALLOT PROCESSING CENTER,
C/O BANKRUPTCY SERVICES LLC,
757 THIRD AVENUE, 3RD FLOOR,
NEW YORK, NY 10017,
-130-
BALLOT PROCESSING CENTER,
C/O BANKRUPTCY SERVICES LLC, P.O. BOX 5014,
FDR STATION, NEW YORK, NY 10150-5014
24.03 | Holders of Claims Entitled to Vote |
24.04 | Vote Required for Acceptance by a Class |
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24.05 | Voting Procedures |
(i) | Holders of Class 4 General Unsecured Claims |
(ii) | Holders of Class 3 Senior Secured Note Claims |
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(iii) | Other |
-133-
-134-
CONCLUSION AND RECOMMENDATION
Dated: | Wilmington, North Carolina | |||||||
December 5, 2005 | ||||||||
Respectfully submitted, | ||||||||
aaiPharma Inc. (for itself and on behalf of each of the other Debtors) | ||||||||
By: | /s/ Matthew E. Czajkowski | |||||||
Matthew E. Czajkowski | ||||||||
Chief Financial Officer and | ||||||||
Chief Administrative Officer |
/s/ Karen M. McKinley | ||
Mark D. Collins (No. 2981) | ||
Rebecca L. Booth (No. 4031) | ||
Karen M. McKinley (No. 4372) | ||
RICHARDS, LAYTON & FINGER, P.A. | ||
One Rodney Square | ||
920 North King Street | ||
Wilmington, Delaware 19801 | ||
Tel: (302) 651-7700 | ||
Fax: (302) 651-7701 | ||
- and - | ||
Bonnie Steingart, Esq. Gary L. Kaplan, Esq. | ||
Arik Preis, Esq. | ||
FRIED, FRANK, HARRIS, SHRIVER | ||
& JACOBSON LLP | ||
One New York Plaza | ||
New York, New York 10004 | ||
Tel: (212) 859-8000 | ||
Fax: (212) 859-4000 | ||
Counsel for Debtors and | ||
Debtors in Possession |
Disclosure Statement Format Consolidated P&L
($USD in real numbers)
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands)
Years Ending December 31 | |||||||||||||||||||||||||
Projected | Projected | Projected | Projected | Projected | Projected | ||||||||||||||||||||
Pre- | Post- | Post- | Post- | Post- | Post- | ||||||||||||||||||||
Confirmation | Confirmation | Confirmation | Confirmation | Confirmation | Confirmation | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||
U.S. Non-Clinical Operations | $ | 46,866 | $ | 69,078 | $ | 72,171 | $ | 78,444 | $ | 85,131 | $ | 96,225 | |||||||||||||
U.S. Clinical Operations | 10,837 | 15,456 | 19,866 | 27,711 | 38,671 | 54,123 | |||||||||||||||||||
Europe Operations | 21,109 | 25,355 | 28,940 | 34,439 | 44,082 | 56,425 | |||||||||||||||||||
Pharmaceutical Products | 36,041 | — | — | — | — | — | |||||||||||||||||||
Other Revenues | 9,367 | 2,745 | 3,070 | 10,206 | 11,591 | 14,164 | |||||||||||||||||||
Total revenues | 124,219 | 112,634 | 124,047 | 150,800 | 179,475 | 220,938 | |||||||||||||||||||
Direct costs (excluding depreciation) | 69,170 | 76,504 | 79,213 | 85,649 | 99,083 | 116,602 | |||||||||||||||||||
Sales and marketing expense | 5,799 | 9,335 | 9,956 | 12,721 | 13,799 | 16,065 | |||||||||||||||||||
General and administrative expenses | 48,385 | 22,031 | 22,641 | 24,849 | 28,031 | 32,317 | |||||||||||||||||||
Depreciation | 14,057 | 6,455 | 7,244 | 8,185 | 9,710 | 11,998 | |||||||||||||||||||
Pharma Residual Expense | 764 | 1,645 | 1 | 1 | 1 | 1 | |||||||||||||||||||
Research and Development | 3,278 | — | — | — | — | — | |||||||||||||||||||
Other | 247 | — | — | — | — | — | |||||||||||||||||||
Total operating costs and expenses | 141,700 | 115,971 | 119,055 | 131,407 | 150,625 | 176,983 | |||||||||||||||||||
Income (Loss) income from operations | (17,481 | ) | (3,337 | ) | 4,992 | 19,393 | 28,851 | 43,954 | |||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||
Interest expense, net | (21,647 | ) | (1,346 | ) | (2,470 | ) | (2,102 | ) | (584 | ) | (420 | ) | |||||||||||||
Amortization of New Credit Facility Financing Fee | — | (600 | ) | (600 | ) | — | — | — | |||||||||||||||||
Gain on Pharma sale | 23,933 | — | — | — | — | — | |||||||||||||||||||
(Loss) from extinguishment of debt | (12,432 | ) | — | — | — | — | — | ||||||||||||||||||
Other | (2,016 | ) | — | — | — | — | — | ||||||||||||||||||
(12,161 | ) | (1,946 | ) | (3,070 | ) | (2,102 | ) | (584 | ) | (420 | ) | ||||||||||||||
Income (Loss) income before income taxes | (29,642 | ) | (5,283 | ) | 1,922 | 17,291 | 28,266 | 43,534 | |||||||||||||||||
Provision for income taxes | 219 | — | — | 174 | 8,803 | 14,910 | |||||||||||||||||||
Net (loss) income | $ | (29,861 | ) | $ | (5,283 | ) | $ | 1,922 | $ | 17,117 | $ | 19,464 | $ | 28,624 | |||||||||||
EBITDA | $ | (3,424 | ) | $ | 3,118 | $ | 12,236 | $ | 27,579 | $ | 38,561 | $ | 55,953 |
Page 1 of 4
Disclosure Statement Format Consolidated Balance Sheet
($USD in real numbers)
CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
December 31 | |||||||||||||||||||||||||
Projected | Projected | Projected | Projected | Projected | Projected | ||||||||||||||||||||
Pre- | Post- | Post- | Post- | Post- | Post- | ||||||||||||||||||||
Confirmation | Confirmation | Confirmation | Confirmation | Confirmation | Confirmation | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,000 | $ | 4,895 | $ | 4,895 | $ | 4,895 | $ | 21,624 | $ | 48,472 | |||||||||||||
Restricted cash | 2,760 | — | — | — | — | — | |||||||||||||||||||
Accounts receivable, net and Work-in-progress | 27,340 | 30,280 | 29,814 | 32,702 | 36,720 | 42,445 | |||||||||||||||||||
Inventories, net | 2,046 | 2,440 | 2,580 | 2,767 | 2,895 | 2,980 | |||||||||||||||||||
Prepaid and other current assets | 4,021 | 4,021 | 4,021 | 4,021 | 4,021 | 4,021 | |||||||||||||||||||
Total current assets | 37,167 | 41,636 | 41,310 | 44,385 | 65,260 | 97,918 | |||||||||||||||||||
Property and equipment, net | 44,254 | 43,299 | 42,155 | 44,070 | 46,159 | 49,461 | |||||||||||||||||||
Goodwill and other intangible assets, net | 13,923 | 109,489 | 109,489 | 109,489 | 109,489 | 109,489 | |||||||||||||||||||
Other assets | 19,872 | 2,644 | 2,044 | 2,044 | 2,044 | 2,044 | |||||||||||||||||||
Total assets | $ | 115,217 | $ | 197,068 | $ | 194,998 | $ | 199,987 | $ | 222,952 | $ | 258,912 | |||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||
Accounts payable | 7,453 | 6,752 | 8,025 | 8,330 | 9,312 | 10,815 | |||||||||||||||||||
Customer advances | 14,917 | 19,159 | 18,684 | 21,626 | 25,720 | 31,553 | |||||||||||||||||||
Accrued wages and benefits | 3,686 | 3,686 | 3,686 | 3,686 | 3,686 | 3,686 | |||||||||||||||||||
Interest payable | 132 | 132 | 132 | 132 | 132 | 132 | |||||||||||||||||||
Other accrued liabilities | 3,261 | 3,261 | 3,261 | 3,261 | 3,261 | 3,261 | |||||||||||||||||||
Total current liabilities | 29,449 | 32,990 | 33,787 | 37,035 | 42,111 | 49,447 | |||||||||||||||||||
Other Long-term debt, less current portion | 9,978 | 21,739 | 16,950 | 1,574 | — | — | |||||||||||||||||||
Liabilities Subject to Compromise | 219,686 | — | — | — | — | — | |||||||||||||||||||
Other liabilities | 9 | — | — | — | — | — | |||||||||||||||||||
Stockholders’ equity (deficit): | |||||||||||||||||||||||||
Old Common stock, at par | 29 | — | — | — | — | — | |||||||||||||||||||
Old Paid-in capital | 91,425 | — | — | — | — | — | |||||||||||||||||||
New Common Stock | — | 147,622 | 147,622 | 147,622 | 147,622 | 147,622 | |||||||||||||||||||
Accumulated deficit | (237,339 | ) | (5,283 | ) | (3,361 | ) | 13,756 | 33,219 | 61,844 | ||||||||||||||||
Other capital subs | 1,993 | — | — | — | — | — | |||||||||||||||||||
Deferred compensation | (13 | ) | — | — | — | — | — | ||||||||||||||||||
Total stockholders’ equity (deficit) | (143,905 | ) | 142,339 | 144,261 | 161,377 | 180,841 | 209,465 | ||||||||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 115,217 | $ | 197,068 | $ | 194,998 | $ | 199,987 | $ | 222,952 | $ | 258,912 | |||||||||||||
Liabilities Subject to Compromise: | ||||
Accounts Payable | $ | 7,746 | ||
Accrued wages and benefits | 576 | |||
Other accrued liabilities | 22,571 | |||
Pre-Petition Sr. Subordinated Notes | 175,000 | |||
Other Long-term Debt | 982 | |||
Interest payable | 12,811 | |||
Total Liabilities Subject to Compromise | $ | 219,686 | ||
Page 2 of 4
Disclosure Statement Format Consolidated Fresh Start Balance Sheet
($USD in real numbers)
CONSOLIDATED PRO FORMA FRESH START BALANCE SHEET
Unaudited
(In thousands)
January 1, 2006 | ||||||||||||||||||||||
Projected | Projected | |||||||||||||||||||||
Pre- | Reorganized | |||||||||||||||||||||
Confirmation | Balance Sheet | |||||||||||||||||||||
December 31, 2005 | Debt Discharge | Exchange of Stock | Fresh Start | January 1, 2006 | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 1,000 | $ | 1,000 | ||||||||||||||||||
Restricted Cash | 2,760 | 2,760 | ||||||||||||||||||||
Accounts receivable, net and Work-in-progress | 27,340 | 27,340 | ||||||||||||||||||||
Inventories, net | 2,046 | 2,046 | ||||||||||||||||||||
Prepaid and other current assets | 4,021 | 4,021 | ||||||||||||||||||||
Total current assets | 37,167 | — | — | — | 37,167 | |||||||||||||||||
Property and equipment, net | 44,254 | 44,254 | ||||||||||||||||||||
Goodwill, net | 13,923 | 95,566 | 109,489 | |||||||||||||||||||
Other assets | 19,872 | (18,334 | ) | 1,539 | ||||||||||||||||||
Total assets | $ | 115,217 | $ | — | $ | — | $ | 77,232 | $ | 192,449 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||
Accounts payable | 7,453 | 7,453 | ||||||||||||||||||||
Customer advances | 14,917 | 14,917 | ||||||||||||||||||||
Accrued wages and benefits | 3,686 | 3,686 | ||||||||||||||||||||
Interest payable | 132 | 132 | ||||||||||||||||||||
Other accrued liabilities | 3,261 | 3,261 | ||||||||||||||||||||
Total current liabilities | 29,449 | — | — | — | 29,449 | |||||||||||||||||
Long-term debt, less current portion | 9,978 | 4,200 | 1,200 | 15,378 | ||||||||||||||||||
Liabilities Subject to Compromise | 219,686 | (219,686 | ) | — | ||||||||||||||||||
Other liabilities | 9 | (9 | ) | — | ||||||||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||||||||
Old Common stock, at par | 29 | (29 | ) | — | ||||||||||||||||||
Old Paid-in capital | 91,425 | 29 | (91,454 | ) | — | |||||||||||||||||
New Common Stock | — | 147,622 | 147,622 | |||||||||||||||||||
Accumulated deficit | (237,339 | ) | 67,873 | 169,466 | — | |||||||||||||||||
Other capital subs | 1,993 | (1,993 | ) | — | ||||||||||||||||||
Deferred compensation | (13 | ) | 13 | — | ||||||||||||||||||
Total stockholders’ equity (deficit) | (143,905 | ) | 215,495 | (0 | ) | 76,032 | 147,622 | |||||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 115,217 | $ | — | $ | (0 | ) | $ | 77,232 | $ | 192,449 | |||||||||||
Page 3 of 4
Disclosure Statement Format Consolidated Statement of Cash Flows
($USD in real numbers)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Years Ending December 31 | |||||||||||||||||||||||||
Projected | Projected | Projected | Projected | Projected | |||||||||||||||||||||
Post- | Post- | Post- | Post- | Post- | |||||||||||||||||||||
Confirmation | Confirmation | Confirmation | Confirmation | Confirmation | |||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||||||
Net (loss) income | $ | (5,283 | ) | $ | 1,922 | $ | 17,117 | $ | 19,464 | $ | 28,624 | ||||||||||||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||||||||||||||||||||||
Depreciation | 6,455 | 7,244 | 8,185 | 9,710 | 11,998 | ||||||||||||||||||||
Amortization of New Credit Facility Financing Fee | 600 | 600 | — | — | — | ||||||||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||||||||
Accounts receivable, net | (2,940 | ) | 466 | (2,888 | ) | (4,018 | ) | (5,725 | ) | ||||||||||||||||
Inventories | (394 | ) | (140 | ) | (187 | ) | (129 | ) | (85 | ) | |||||||||||||||
Prepaid and other assets | — | — | — | — | — | ||||||||||||||||||||
Restricted Cash | 1,055 | — | — | — | — | ||||||||||||||||||||
Accounts payable | (700 | ) | 1,272 | 306 | 982 | 1,503 | |||||||||||||||||||
Customer advances | 4,241 | (475 | ) | 2,943 | 4,094 | 5,833 | |||||||||||||||||||
Interest payable | — | — | — | — | — | ||||||||||||||||||||
Accrued wages and benefits and other accrued liabilities | — | — | — | — | — | ||||||||||||||||||||
Net cash (used in) provided by operating activities | 3,034 | 10,889 | 25,476 | 30,103 | 42,148 | ||||||||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||
Purchases of property and equipment | (5,500 | ) | (6,100 | ) | (10,100 | ) | (11,800 | ) | (15,300 | ) | |||||||||||||||
Liabilities Subject to Compromise | — | — | — | — | — | ||||||||||||||||||||
Other | — | — | — | — | — | ||||||||||||||||||||
Net cash provided by (used in) investing activities | (5,500 | ) | (6,100 | ) | (10,100 | ) | (11,800 | ) | (15,300 | ) | |||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||
Draw (Repayment) of New Credit Facility | 6,361 | (4,789 | ) | (15,376 | ) | (1,574 | ) | — | |||||||||||||||||
Other | — | — | — | — | — | ||||||||||||||||||||
Net cash provided by financing activities | 6,361 | (4,789 | ) | (15,376 | ) | (1,574 | ) | — | |||||||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | 3,895 | $ | 0 | $ | (0 | ) | $ | 16,729 | $ | 26,848 | ||||||||||||||
Effect of exchange rate changes on cash | — | — | — | — | — | ||||||||||||||||||||
Cash and cash equivalents, beginning of year | 1,000 | 4,895 | 4,895 | 4,895 | 21,624 | ||||||||||||||||||||
Cash and cash equivalents, end of year | $ | 4,895 | $ | 4,895 | $ | 4,895 | $ | 21,624 | $ | 48,472 | |||||||||||||||
Beginning Other Long-term debt, less current portion | 15,378 | 21,739 | 16,950 | 1,574 | — | ||||||||||||||||||||
Ending Other Long-term debt, less current portion | 21,739 | 16,950 | 1,574 | — | — | ||||||||||||||||||||
Change In New Credit Facility | $ | 6,361 | $ | (4,789 | ) | $ | (15,376 | ) | $ | (1,574 | ) | $ | — |
Page 4 of 4
1 | The German Operation included other European assets including but not limited to: AAI Applied Analytical Industries Deutschland Verwaltungs-gesellschaft mbH; Applied Analytical Industries Deutschland GmbH & Co., KG; Applied Analytical Industries France S.A.R.L.; L.A.B. (UK) Limited; AAI Benelux B.V.; Technopharm S.A., and; NEOSAN Arzneimittel VertriebsgesellschaftmbH. | |
2 | Intellectual property assets include the Xanodyne Royalties (related to Lynxorb, Darvocet NXR and Darvocet Suspension), Odyssey, Ecabet and various Generic ANDAs. | |
3 | Certain Non-Clinical Operations include: Bio-analytical/Bioequivalence (“BA/BE”), Analytical (“ADL”), Formulations Development (“FDL”) and Routine Testing (“RT”). Certain Clinical Operations includes operations in Toronto. |
• | October 31, 2005 — The date the liquidation process is assumed to begin (the “Liquidation Commencement Date”). The book values represented on the Liquidation Analysis Summary Schedule (see Note A) are as of the Balance Sheet Date except for cash, which has been reduced from $8.9M as of the Balance Sheet Date to $1.0M as of the Liquidation Commencement Date to reflect the net use of cash over the 2-month period. |
• | November 1, 2005 through April 30, 2006 (the “Wind-down Period”) — The liquidated assets are assumed to be monetized over the Wind-down Period. The sale proceeds associated with Germany, the Intellectual Property Assets and certain Clinical and Non-Clinical Operations are assumed to be collected at the end of the 6-month period. Certain necessary corporate personnel would be retained in order to facilitate an orderly liquidation. In addition to the retention of necessary corporate personnel, the Liquidation Analysis also incorporates the continued involvement of certain professionals and the retention of a chapter 7 trustee. |
-2-
Sold As Going-Concern | Orderly Liquidation | |
Germany | Corporate HQ | |
Intellectual Property Assets | Learning Center | |
Analytical Development | Clinical Services Natick | |
Formulations Development | Clinical Supplies Charleston | |
Routine Testing | Clinical Supplies Wilmington | |
Bio-Analytic Labs & CRU/Statistics | ||
Clinical Services Toronto |
4 | The current gain or loss on sale is based on the book value of the investment in the German subsidiaries. |
-3-
Low | High | |||||||
Xanodyne Royalties | $ | 23M | $ | 31M | ||||
Odyssey | $ | 4M | $ | 4M | ||||
Ecabet | $ | 830K | $ | 830K | ||||
Generic ANDAs | $ | 630K | $ | 630K |
Assumed Revenue Multiple | 0.50x | 0.60x | 0.70x | 0.80x | ||||||||||||
2005 Revenue Forecast | $ | 36,967,563 | $ | 36,967,563 | $ | 36,967,563 | $ | 36,967,563 | ||||||||
Assumed Value | $ | 18,483,781 | $ | 22,180,538 | $ | 25,877,294 | $ | 29,574,050 | ||||||||
Assumed Value +10% | $ | 20,332,159 | $ | 24,398,591 | $ | 28,465,023 | $ | 32,531,455 | ||||||||
Assumed Value -10% | $ | 16,635,403 | $ | 19,962,484 | $ | 23,289,565 | $ | 26,616,645 |
-4-
-5-
Book Value of Going- | Book Value of | |||||||||||||||
Book Value(A) | Concern Sale Assets(A) | Liquidated Assets(A) | ||||||||||||||
* | Land | $ | 2,785,837.10 | $ | 1,105,234.90 | $ | 1,680,602.20 | |||||||||
* | Buildings & Improvement | 30,403,026.76 | 11,066,474.50 | 19,336,552.26 | ||||||||||||
* | Machinery & Equipment | 59,127,312.90 | 20,856,194.80 | 38,271,118.10 | ||||||||||||
* | Construction in Prog | 1,018,532.43 | 665,069.15 | 353,463.28 | ||||||||||||
Total Gross Fixed Assets | $ | 93,334,709.19 | $ | 33,692,973.34 | $ | 59,641,735.85 | ||||||||||
* | Land, net | $ | 2,760,155.13 | $ | 1,101,644.61 | $ | 1,658,510.52 | |||||||||
* | Buildings & Improvement, net | 22,629,600.41 | 7,738,762.47 | 14,890,837.94 | ||||||||||||
* | Machinery & Equipment, net | 14,899,057.85 | 3,150,668.11 | 11,748,389.74 | ||||||||||||
* | Construction in Prog | 1,018,532.43 | 665,069.15 | 353,463.28 | ||||||||||||
Total Net Fixed Assets | $ | 41,307,345.82 | $ | 12,656,144.34 | $ | 28,651,201.48 | ||||||||||
Total Acc. Depreciation | $ | (52,027,363.37 | ) | $ | (21,036,829.01 | ) | $ | (30,990,534.36 | ) |
Low | High | |||||||
Land | 55 | % | 61 | % | ||||
Buildings and improvement | 16 | % | 20 | % | ||||
Machinery and equipment | 2 | % | 3 | % | ||||
Construction in progress | 0 | % | 0 | % |
-6-
-7-
-8-
FOR THE DISTRICT OF DELAWARE
) | ||||||||
In re: | ) | Chapter 11 | ||||||
) | ||||||||
AAIPHARMA INC.,et al., | ) | Case Nos. 05-11341 through 05-11345 and | ||||||
) | 05-11347 through 05-11350 (PJW) | |||||||
Debtors. | ) | |||||||
) | Jointly Administered | |||||||
) |
Dated: | Wilmington, North Carolina December 1, 2005 |
RICHARDS, LAYTON & FINGER, P.A. | FRIED, FRANK, HARRIS, SHRIVER | |||||
One Rodney Square | & JACOBSON LLP | |||||
920 North King Street | One New York Plaza | |||||
Wilmington, Delaware 19801 | New York, New York 10004-1980 | |||||
Attn: Mark D. Collins, Esq. | Attn: Bonnie Steingart, Esq. | |||||
Rebecca L. Booth, Esq. | Gary L. Kaplan, Esq. | |||||
Karen M. McKinley, Esq. | Arik Preis, Esq. | |||||
Tel: | (302) 651-7700 | Tel: | (212) 859-8000 | |||
Fax: | (302) 651-7701 | Fax: | (212) 859-4000 |
Page | ||||||||
DEBTORS’ JOINT CHAPTER 11 PLAN | ||||||||
ARTICLE ONE | ||||||||
DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND | ||||||||
GOVERNING LAW | ||||||||
ARTICLE TWO | ||||||||
PROVISIONS FOR TREATMENT OF ADMINISTRATIVE EXPENSES | ||||||||
2.01. | Administrative Expenses | 16 | ||||||
ARTICLE THREE | ||||||||
PROVISIONS FOR TREATMENT OF PRIORITY TAX CLAIMS | ||||||||
3.01. | Priority Tax Claims | 17 | ||||||
ARTICLE FOUR | ||||||||
CLASSIFICATION OF CLAIMS AND INTERESTS | ||||||||
4.01. | Designation of Classes | 17 | ||||||
4.02. | Classification | 18 | ||||||
ARTICLE FIVE | ||||||||
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND NOT | ||||||||
IMPAIRED BY THIS PLAN | ||||||||
5.01. | Classes of Claims and Interests Impaired by this Plan and Entitled to Vote | 18 | ||||||
5.02. | Class of Claims and Interests Impaired by this Plan and Deemed to Reject this Plan | 18 | ||||||
5.03. | Classes of Claims Not Impaired by this Plan and Conclusively Presumed to Accept this Plan | 18 | ||||||
ARTICLE SIX | ||||||||
PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS | ||||||||
6.01. | Priority Claims (Class 1) | 19 | ||||||
6.02 | Miscellaneous Secured Claims (Class 2) | 19 | ||||||
6.03 | Senior Secured Note Claims (Class 3) | 19 | ||||||
6.04 | General Unsecured Claims (Class 4) | 20 | ||||||
6.05 | Convenience Claims (Class 5) | 20 | ||||||
6.06 | 510(b) Note Claims (Class 6) | 21 | ||||||
6.07 | Old Equity Interests (Class 7) | 21 |
1
Page | ||||||||
ARTICLE SEVEN | ||||||||
ACCEPTANCE OR REJECTION OF THIS PLAN; EFFECT OF REJECTION BY ONE | ||||||||
OR MORE IMPAIRED CLASSES OF CLAIMS OR INTERESTS | ||||||||
7.01. | Acceptance by an Impaired Class of Creditors | 21 | ||||||
7.02. | Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code | 21 | ||||||
ARTICLE EIGHT | ||||||||
EXECUTORY CONTRACTS AND UNEXPIRED LEASES | ||||||||
8.01. | Assumption and Rejection of Executory Contracts and Unexpired Leases | 21 | ||||||
8.02. | Cure of Defaults | 22 | ||||||
8.03. | Bar Date for Rejection Damages | 23 | ||||||
8.04. | Employee Benefit Plans | 23 | ||||||
ARTICLE NINE | ||||||||
IMPLEMENTATION OF THIS PLAN | ||||||||
9.01. | Vesting of Property | 23 | ||||||
9.02. | Substantive Consolidation | 23 | ||||||
9.03. | Retention, Enforcement and Release of Causes of Action | 24 | ||||||
9.04. | Implementation | 25 | ||||||
9.05. | New Credit Facility | 25 | ||||||
9.06. | Corporate Action | 25 | ||||||
9.07. | Issuance of New Securities | 25 | ||||||
9.08. | Stockholder and Registration Rights Agreements | 26 | ||||||
9.09. | Cancellation of Existing Securities and Agreements | 26 | ||||||
9.10. | Dissolution | 26 | ||||||
9.11. | Amended and Restated Certificates of Incorporation; Amended and Restated By-Laws | 26 | ||||||
9.12. | Directors of the Reorganized Debtors | 26 | ||||||
9.13. | Management Agreements | 27 | ||||||
9.14. | Transactions on Business Days | 27 | ||||||
9.15. | Termination of DIP Financing Agreement | 27 | ||||||
9.16. | Ordinary Course Refunds | 27 | ||||||
ARTICLE TEN | ||||||||
LITIGATION LLC | ||||||||
10.01. | Establishment of the Litigation LLC; Funding | 27 | ||||||
10.02. | Transfer of Designated Litigation to the Litigation LLC | 28 | ||||||
10.03. | Litigation LLC Interests; Term | 29 | ||||||
10.04. | Procedures for Distributions | 30 | ||||||
10.05. | Annual Distribution; Withholding | 30 | ||||||
10.06. | Litigation; Responsibilities of Litigation Manager | 30 |
2
Page | ||||||||
ARTICLE ELEVEN | ||||||||
PROVISIONS COVERING DISTRIBUTIONS | ||||||||
11.01. | Timing of Distributions Under this Plan | 31 | ||||||
11.02. | Payments and Distributions With Respect to Disputed Claims | 31 | ||||||
11.03. | Allocation of Consideration | 31 | ||||||
11.04. | Cash Payments | 31 | ||||||
11.05. | Payment of Statutory Fees | 32 | ||||||
11.06. | No Interest | 32 | ||||||
11.07. | Setoffs | 32 | ||||||
11.08. | Special Provision Regarding Unimpaired Claims | 32 | ||||||
11.09. | Fractional Securities | 32 | ||||||
11.10. | Compliance with Tax Requirements | 33 | ||||||
11.11. | Persons Deemed Holders of Registered Securities; Distribution Record Date | 33 | ||||||
11.12. | Surrender of Existing Securities | 33 | ||||||
11.13. | Undeliverable or Unclaimed Distributions | 33 | ||||||
11.14. | Distributions on Account of Senior Secured Notes | 34 | ||||||
11.15. | Exemption From Certain Transfer Taxes | 34 | ||||||
11.16. | Rule 9019 Settlement and Compromise of Disputes Between the Debtors, Holders of Senior Secured Note Claims and Holders of General Unsecured Claims | 34 | ||||||
ARTICLE TWELVE | ||||||||
PLAN ADMINISTRATION | ||||||||
12.01. | Duties | 35 | ||||||
12.02. | Funding | 35 | ||||||
12.03. | Distributions | 35 | ||||||
12.04. | Retention of Professionals | 35 | ||||||
12.05. | Succession | 35 | ||||||
12.06. | Cooperation | 35 | ||||||
12.07. | Failure by Class 4 to Accept the Plan | 36 | ||||||
ARTICLE THIRTEEN | ||||||||
PROCEDURES FOR RESOLVING DISPUTED GENERAL UNSECURED CLAIMS | ||||||||
13.01. | Objections to General Unsecured Claims; Disputed General Unsecured Claims | 36 | ||||||
13.02. | Estimation of General Unsecured Claims | 36 | ||||||
13.03. | Timing of Payments and Distributions With Respect to Disputed General Unsecured Claims | 37 | ||||||
13.04. | General Unsecured Claims Reserve | 37 | ||||||
13.05. | Distributions After Allowance of Disputed General Unsecured Claims | 37 | ||||||
13.06. | Distributions After Disallowance of Disputed General Unsecured Claims | 38 |
3
Page | ||||||||
ARTICLE FOURTEEN | ||||||||
PROCEDURES FOR RESOLVING DISPUTED CLAIMS OTHER THAN GENERAL UNSECURED CLAIMS | ||||||||
14.01. | Objections to Claims; Disputed Claims | 38 | ||||||
14.02. | Estimation of Claims | 39 | ||||||
14.03. | Timing of Payments and Distributions with Respect to Disputed Claims other than General Unsecured Claims | 39 | ||||||
14.04. | Distributions After Allowance of Disputed Claims other than General Unsecured Claims | 39 | ||||||
14.05. | Prosecution of Objections | 39 | ||||||
ARTICLE FIFTEEN | ||||||||
DISCHARGE, INJUNCTION, RELEASES AND SETTLEMENTS OF CLAIMS | ||||||||
15.01. | Discharge of All Claims and Interests and Releases | 40 | ||||||
15.02. | Exculpation | 42 | ||||||
15.03. | Injunction | 42 | ||||||
15.04. | Guarantees and Claims of Subordination | 42 | ||||||
15.05. | Survival of Indemnification Obligations | 43 | ||||||
15.06. | Cooperation with Litigation LLC | 44 | ||||||
ARTICLE SIXTEEN | ||||||||
CONFIRMATION AND EFFECTIVE DATE | ||||||||
16.01. | Conditions to Entry of the Confirmation Order | 44 | ||||||
16.02. | Conditions to Effective Date | 44 | ||||||
16.03. | Waiver of Conditions | 45 | ||||||
16.04. | Effect of Failure of Conditions | 45 | ||||||
ARTICLE SEVENTEEN | ||||||||
MISCELLANEOUS PROVISIONS | ||||||||
17.01. | Court to Retain Jurisdiction | 45 | ||||||
17.02. | Binding Effect of this Plan | 47 | ||||||
17.03. | Nonvoting Stock | 47 | ||||||
17.04. | Authorization of Corporate Action | 47 | ||||||
17.05. | Withdrawal of this Plan | 47 | ||||||
17.06. | Captions | 47 | ||||||
17.07. | Record Date for Voting Purposes | 47 | ||||||
17.08. | Method of Notice | 48 | ||||||
17.09. | Dissolution of any Committee | 49 | ||||||
17.10. | Amendments and Modifications to Plan | 50 | ||||||
17.11. | Section 1125(e) of the Bankruptcy Code | 50 | ||||||
17.12. | Post-Confirmation Obligations | 50 | ||||||
17.13. | Severability of Plan Provisions | 50 | ||||||
17.14. | Successors and Assigns | 50 |
4
DEFINITIONS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
5
6
7
8
9
10
11
12
13
14
15
PROVISIONS FOR TREATMENT OF ADMINISTRATIVE EXPENSES
16
PROVISIONS FOR TREATMENT OF PRIORITY TAX CLAIMS
CLASSIFICATION OF CLAIMS AND INTERESTS
17
Class | Status | Voting Rights | ||
Class 1: Priority Claims | Unimpaired | deemed to accept the Plan; not entitled to vote | ||
Class 2: Miscellaneous Secured Claims | Unimpaired | deemed to accept the Plan; not entitled to vote | ||
Class 3: Senior Secured Note Claims | Impaired | entitled to vote | ||
Class 4: General Unsecured Claims | Impaired | entitled to vote | ||
Class 5: Convenience Claims | Unimpaired | deemed to accept the Plan; not entitled to vote | ||
Class 6: 510(b) Note Claims | Impaired | deemed to reject the Plan; not entitled to vote | ||
Class 7: Old Equity Interests | Impaired | deemed to reject the Plan; not entitled to vote |
IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED BY THIS PLAN
18
PROVISIONS FOR TREATMENT OF
CLAIMS AND INTERESTS
19
20
ACCEPTANCE OR REJECTION OF THIS PLAN;
EFFECT OF REJECTION BY ONE OR MORE IMPAIRED
CLASSES OF CLAIMS OR INTERESTS
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
21
22
IMPLEMENTATION OF THIS PLAN
23
24
25
26
LITIGATION LLC
27
28
29
30
PROVISIONS COVERING DISTRIBUTIONS
31
32
33
34
PLAN ADMINISTRATION
35
PROCEDURES FOR RESOLVING DISPUTED GENERAL UNSECURED CLAIMS
36
37
PROCEDURES FOR RESOLVING DISPUTED CLAIMS OTHER THAN GENERAL
UNSECURED CLAIMS
38
39
DISCHARGE, INJUNCTION, RELEASES AND SETTLEMENTS OF CLAIMS
40
41
42
43
CONFIRMATION AND EFFECTIVE DATE
44
MISCELLANEOUS PROVISIONS
45
46
47
2320 Scientific Park Drive
Wilmington, North Carolina 28405
Attn.: Mr. Matthew Czajkowski
Chief Financial Officer and Chief Administrative Officer
One New York Plaza
New York, New York 10004-1980
Attn.: Gary L. Kaplan, Esq.
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attn.: Rebecca L. Booth, Esq.
1201 Market Street, Suite 1500
Wilmington, Delaware 19801
Attn.: Kurt F. Gwynne, Esq.
1650 Market Street
Philadelphia, Pennsylvania 19103
Attn.: Claudia Z. Springer, Esq.
One Chase Manhattan Plaza
48
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
Attn.: Robert J. Dehney, Esq.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn.: David Sawyer
919 Third Avenue
New York, New York 10022
Attn.: James M. Peck, Esq.
1000 West Street
P.O. Box 391
Wilmington, Delaware 19899
Attn.: Edward J. Kosmowski, Esq.
49
50
December 1, 2005
Respectfully submitted, | ||||||
aaiPharma Inc. (for itself and on behalf of | ||||||
each of the other Debtors) | ||||||
By: | /s/ Matthew E. Czajkowski | |||||
Matthew E. Czajkowski Chief Financial Officer and Chief Administrative Officer |
RICHARDS, LAYTON & FINGER, P.A. | ||
/s/ Karen M. McKinley | ||
Mark D. Collins (No. 2981) | ||
Rebecca L. Booth (No. 4031) | ||
Karen M. McKinley (No. 4372) | ||
One Rodney Square | ||
P.O. Box 551 | ||
Wilmington, Delaware 19899 | ||
Telephone: (302) 651-7700 | ||
Facsimile: (302) 651-7701 | ||
- and - | ||
FRIED, FRANK, HARRIS, SHRIVER | ||
& JACOBSON LLP | ||
Bonnie Steingart, Esq. | ||
Gary L. Kaplan, Esq. | ||
Arik Preis, Esq. | ||
One New York Plaza | ||
New York, New York 10004 | ||
Tel: (212) 859-8000 | ||
Fax: (212) 859-4000 | ||
Co-Counsel for Debtors and Debtors in Possession |
DECEMBER 31, 2004
SEPTEMBER 30, 2005
JUNE 30, 2005
SUPPORT OF THE PLAN
OF AAIPHARMA INC.,ET AL.,DEBTORS
CHAPTER 11 CASE NO. 05-11.341 (PJW) JOINTLY ADMINISTERED
1 Chase Manhattan Plaza
New York, New York 10005
TO: | HOLDERS OF SENIOR SECURED NOTES ISSUED BY AA1PHARMA INC. AND GUARANTEED BY ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION |
aaiPharma, Inc.
1201 Market Street
Wilmington, Delaware 19801
Sincerely yours, | ||||
Reed Smith LLP | ||||
Counsel to Official Committee Of Unsecured | ||||
Creditors Of aaiPharma, Inc. | ||||
By: | ||||
Reed Smith LLP | J.H. Cohn LLP | |||
1201 Market Street | 333 Thornall Street | |||
Suite 1500 | 6th Floor | |||
Wilmington, DE 19801 | Edison, NJ 08837 | |||
Attn: Kurt F. Gwynne, Esquire | Attn: | Howard Konicov | ||
Adam Hanover | ||||
2500 One Liberty Place | ||||
1650 Market Street | Financial Advisor to the Official Committee of | |||
Philadelphia, PA 19103-7301 | Unsecured Creditors of aaiPharma, Inc. | |||
Attn: Claudia Z. Springer, Esquire | ||||
Counsel to the Official Committee of | ||||
Unsecured Creditors of aaiPharma, Inc. |
(§ 4.05) that the Xanodyne Sale resulted in a $40 million premium over the original “stalking horse” bid by Xanodyne.
DR. FREDERICK D. SANCILIO
OCTOBER 1, 2005 THROUGH OCTOBER 31, 2005
FOR THE DISTRICT OF DELAWARE
) | ||||||||||||
In re: | ) | Chapter 11 | ||||||||||
) | ||||||||||||
) | Case Nos. 05-11341 through 05-11345 and | |||||||||||
AAIPHARMA INC.,et al., | ) | 05-11347 through 05-11350 (PJW) | ||||||||||
) | ||||||||||||
Debtors. | ) | Jointly Administered | ||||||||||
) | ||||||||||||
METHODOLOGY, AND DISCLAIMER REGARDING DEBTORS’ SIXTH
MONTHLY OPERATING REPORT
1 | The Debtors are the following entities: AAI, Applied Analytical Industries Learning Center, Inc., AAI Properties, Inc., AAI Technologies, Inc., AAI Japan, Inc., aaiPharma LLC, AAI Development Services, Inc. (Delaware), AAI Development Services, Inc. (Massachusetts) and Kansas City Analytical Services, Inc. |
2
Amount Claimed | Amount Estimated | |||||||
Class 1 (Priority Claims) | $ | 1,600,000.00 | $ | 68,000 | ||||
Class 2 (Miscellaneous Secured Claims) | $ | 2,500,000 | $ | 1,300,000 | ||||
Class 3 (Senior Secured Note Claims) | $ | 187,811,020.83 | $ | 187,811,020.83 | ||||
Class 4 (General Unsecured Claims) | $ | 65,827,000.00 | $ | 25-40 million | ||||
Class 5 (Convenience Claims) | approximately $14,000.00 | approximately $14,000.00 |
2 | A more detailed description and explanation of classes of claims and estimated amounts of claims in each class can be found in the Disclosure Statement. |
3
4
5
3 | The Debtors repaid the obligations owing under this financing agreement shortly after the Bankruptcy Court entered the final order approving the Debtors’ post-petition financing on June 6, 2005. |
6
4 | The booked gain does not reflect any contingent consideration to be received from the Debtors from the Sale. |
7
8
DISTRICT OF DELAWARE
In re: AAIPHARMA INC.,et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
Document | Explanation | |||||
REQUIRED DOCUMENTS | Form No. | Attached | Attached | |||
GLOBAL NOTES | X | |||||
UNCONSOLIDATED SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS | MOR - 1 | X | ||||
Bank Reconciliation (or copies of debtor’s bank reconciliations) | MOR - 1 (CON’T) | See Certifications | ||||
Copies of Bank Statements | ||||||
Cash disbursements journals | ||||||
UNCONSOLIDATED STATEMENT OF OPERATIONS | MOR - 2 | X | ||||
UNCONSOLIDATED BALANCE SHEET | MOR - 3 | X | ||||
Summary of Liabilities Subject to Compromise | ||||||
CERTIFICATIONS | X | |||||
STATUS OF POSTPETITION TAXES | MOR - 4 | See Certifications | ||||
Copies of IRS Form 6123 or payment receipt | ||||||
Copies of tax returns filed during reporting period | ||||||
UNCONSOLIDATED SUMMARY OF UNPAID POST PETITION DEBTS | MOR - 4 | X | ||||
Listing of aged accounts payable | ||||||
UNCONSOLIDATED ACCOUNTS RECEIVABLE RECONCILIATION AND AGING | MOR - 5 | X | ||||
DEBTOR QUESTIONNAIRE | MOR - 5 | X |
AAIPHARMA INC.,et al.1 | ||
Signature of Debtor | Date | |
Signature of Joint Debtor | Date | |
/s/ Mattew E. Czajkowski | 11/21/2005 | |
Signature of Authorized Individual* | Date | |
Matthew E. Czajkowski | Executive Vice President, Chief Financial & Administrative Officer | |
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. | |
1 | The Debtors are the following entities: aaiPharma Inc. (Case No. 05-11341), Applied Analytical Industries Learning Center, Inc. (Case No. 05-11342), aai Properties, Inc. (Case No. 05-11343), aai Technologies, Inc. (Case No. 05-11344), aai Japan, Inc. (Case No. 05-11345), aaiPharma, LLC (Case No. 05-11347), Kansas City Analytical Services Inc. (Case No. 05-11348), aai Development Services, Inc. (Del) (Case No. 05-11349) and aai Development Services, Inc. (Mass) (Case No. 05-11350). |
FORM MOR | Page 1 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
CURRENT | ||||||||
REPORTING | CUMULATIVE | |||||||
PERIOD | FILING TO DATE | |||||||
Actual | Actual | |||||||
BOOK CASH — BEGINNING BALANCE | $ | 4,177,431 | $ | 653,397 | ||||
RECEIPTS: | ||||||||
Development Services | 4,562,520 | 30,879,863 | ||||||
Pharma | 138,085 | 13,751,396 | ||||||
Accounts Receivable | 4,700,605 | 44,631,259 | ||||||
Other | 774,316 | 1,592,164 | ||||||
Pharma Sale Proceeds2 | — | 15,035,504 | ||||||
Alternate Bidder Deposit | — | 7,750,025 | ||||||
DIP Borrowing | 2,000,000 | 188,000,000 | ||||||
TOTAL RECEIPTS | $ | 7,474,920 | $ | 257,008,951 | ||||
DISBURSEMENTS: | ||||||||
Accounts Payable and Other | 6,497,326 | 38,531,637 | ||||||
Salaries & Wages — Domestic | 3,060,154 | 20,546,856 | ||||||
Financing Payments | — | 186,565,931 | ||||||
Return of Alternate Bidder Deposit3 | — | 7,750,040 | ||||||
Interest Expense — Term, Revolver and Related Fees | 13,259 | 2,186,273 | ||||||
TOTAL DISBURSEMENTS | $ | 9,570,739 | $ | 255,580,737 | ||||
NET CASH FLOW | $ | (2,095,819 | ) | $ | 1,428,215 | |||
BOOK CASH — END OF MONTH4 | $ | 2,081,612 | $ | 2,081,612 |
DISBURSEMENTS FOR CALCULATING U.S. TRUSTEE QUARTERLY FEES | ||||
(FROM CURRENT MONTH COLUMN) | ||||
TOTAL DISBURSEMENTS | $ | 9,570,739 | ||
LESS: TRANSFERS TO DEBTOR IN POSSESSION ACCOUNTS | — | |||
PLUS: ESTATE DISBURSEMENTS MADE BY OUTSIDE SOURCES(i.e., from escrow accounts) | — | |||
TOTAL DISBURSEMENTS FOR CALCULATING U.S. TRUSTEE QUARTERLY FEES | $ | 9,570,739 | ||
CURRENT | ||||||||||||
REPORTING | CUMULATIVE | |||||||||||
DISBURSEMENTS BY LEGAL ENTITY | PERIOD | FILING TO DATE | ||||||||||
aaiPharma Inc. | (Case No. 05-11341) | $ | 9,466,252 | $ | 254,569,943 | |||||||
Payments made by aaiPharma Inc. On Behalf of Other Debtor Entities: | ||||||||||||
Applied Analytical Industries Learning Center, Inc. | 73,053 | 413,921 | ||||||||||
aai Properties, Inc. | — | — | ||||||||||
aai Technologies, Inc. | — | — | ||||||||||
aai Japan, Inc. | — | — | ||||||||||
aaiPharma LLC | 710,754 | 19,674,439 | ||||||||||
Kansas City Analytical Services, Inc. | — | — | ||||||||||
aai Development Services, Inc. (Del) | — | — | ||||||||||
aai Development Services, Inc. (Mass) | 1,607,632 | 7,929,859 | ||||||||||
2,391,438 | 28,018,218 | |||||||||||
Applied Analytical Industries Learning Center, Inc. | (Case No. 05-11342) | — | — | |||||||||
aai Properties, Inc. | (Case No. 05-11343) | — | — | |||||||||
aai Technologies, Inc. | (Case No. 05-11344) | — | — | |||||||||
aai Japan, Inc. | (Case No. 05-11345) | 30,120 | 228,158 | |||||||||
aaiPharma, LLC | (Case No. 05-11347) | — | — | |||||||||
Kansas City Analytical Services, Inc. | (Case No. 05-11348) | — | — | |||||||||
aai Development Services, Inc. (Del) | (Case No. 05-11349) | — | — | |||||||||
aai Development Services, Inc. (Mass)1 | (Case No. 05-11350) | 74,368 | 782,636 | |||||||||
TOTAL DISBURSEMENTS | $ | 9,570,739 | $ | 255,580,737 | ||||||||
1 | Cash payments made from the TD Canada Trust account are in Canadian dollars. The table above (which is in $USD) assumes a $USD to $CAD exchange rate of $1.1771. | |
2 | Net cash proceeds from the Pharma sale, but prior to certain fees and expenses related to the sale. The transaction closed on July 25, 2005. | |
3 | Cash deposit from a qualified bidder that participated in the Section 363 Auction of Pharma. Debtor returned the bidder’s deposit on August 4, 2005. | |
4 | Cash balance as of October 31, 2005 per the cash flow excludes $6.3 million of restricted cash associated with the escrow account established as part of the Pharma sale. |
FORM MOR | Page 2 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
Applied Analytical | ||||||||||||||||||||||||||||
Industries Learning | aai Development | |||||||||||||||||||||||||||
Reporting Period: | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
October 1, 2005 - October 31, 2005 | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No. 05-11345) | (Case No. 05-11347) | (Case No. 05-11350) | |||||||||||||||||||||
Sales — Trade | $ | 5,428,451 | $ | — | $ | — | $ | — | $ | — | $ | 141,081 | $ | 1,749,892 | ||||||||||||||
Sales — InterCompany | 3,820 | — | — | — | — | — | — | |||||||||||||||||||||
Pass-Throughs (Net) | (428,270 | ) | — | — | — | — | — | (581,262 | ) | |||||||||||||||||||
Sales Adjustments | (8,150 | ) | — | — | — | — | (72,042 | ) | 463,312 | |||||||||||||||||||
Sales WIP | (666,441 | ) | — | — | — | — | — | (771,286 | ) | |||||||||||||||||||
Licensing Revenues | — | — | — | — | — | — | — | |||||||||||||||||||||
Royalties Revenue | — | — | 66,452 | — | — | — | — | |||||||||||||||||||||
Net Sales | $ | 4,329,410 | $ | — | $ | 66,452 | $ | — | $ | — | $ | 69,039 | $ | 860,656 | ||||||||||||||
I/C COS Charges | (5,782 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Direct COS | 3,522,820 | — | — | — | — | 19,765 | 751,024 | |||||||||||||||||||||
Total Cost of Sales | $ | 3,517,038 | $ | — | $ | — | $ | — | $ | — | $ | 19,765 | $ | 751,024 | ||||||||||||||
Gross Profit from Operations | $ | 812,372 | $ | — | $ | 66,452 | $ | — | $ | — | $ | 49,274 | $ | 109,632 | ||||||||||||||
Sales & Marketing | 322,015 | — | — | — | 26,861 | 662 | 65,394 | |||||||||||||||||||||
General & Administrative | 3,123,927 | 27,465 | — | — | — | 59,073 | 104,464 | |||||||||||||||||||||
Research & Development | 76,607 | — | — | — | — | — | — | |||||||||||||||||||||
Income/(Loss) Operations | $ | (2,710,177 | ) | $ | (27,465 | ) | $ | 66,452 | $ | — | $ | (26,861 | ) | $ | (10,461 | ) | $ | (60,226 | ) | |||||||||
Interest (Income) | (9,903 | ) | — | — | — | — | — | (2 | ) | |||||||||||||||||||
Interest and Other Expense (Income) | (315,181 | ) | — | — | — | (363 | ) | 56,517 | (1,796 | ) | ||||||||||||||||||
Total Interest/Other | (325,084 | ) | — | — | — | (363 | ) | 56,517 | (1,798 | ) | ||||||||||||||||||
Income (Loss) Before Tax | $ | (2,385,093 | ) | $ | (27,465 | ) | $ | 66,452 | $ | — | $ | (26,498 | ) | $ | (66,978 | ) | $ | (58,428 | ) | |||||||||
Income Taxes | — | — | — | — | — | — | — | |||||||||||||||||||||
Income (Loss) After Tax | $ | (2,385,093 | ) | $ | (27,465 | ) | $ | 66,452 | $ | — | $ | (26,498 | ) | $ | (66,978 | ) | $ | (58,428 | ) | |||||||||
Net Income (Loss) | $ | (2,385,093 | ) | $ | (27,465 | ) | $ | 66,452 | $ | — | $ | (26,498 | ) | $ | (66,978 | ) | $ | (58,428 | ) | |||||||||
Applied Analytical | ||||||||||||||||||||||||||||
Industries Learning | aai Development | |||||||||||||||||||||||||||
Cumulative: | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
May 10, 2005 - October 31, 2005 | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No. 05-11345) | (Case No. 05-11347) | (Case No. 05-11350) | |||||||||||||||||||||
Sales — Trade | $ | 25,428,705 | $ | — | $ | — | $ | — | $ | — | $ | 18,153,715 | 5,986,449 | |||||||||||||||
Sales — InterCompany | 63,447 | — | — | — | — | — | — | |||||||||||||||||||||
Pass-Throughs (Net) | (1,928,367 | ) | — | — | — | — | (39 | ) | (1,410,400 | ) | ||||||||||||||||||
Sales Adjustments | 68,604 | — | — | — | — | (7,291,285 | ) | (359,251 | ) | |||||||||||||||||||
Sales WIP | (780,469 | ) | — | — | — | — | — | (287,451 | ) | |||||||||||||||||||
Licensing Revenues | — | — | (75,000 | ) | — | — | — | — | ||||||||||||||||||||
Royalties Revenue | — | — | 2,515,649 | — | — | — | — | |||||||||||||||||||||
Net Sales | $ | 22,851,920 | $ | — | $ | 2,440,649 | $ | — | $ | — | $ | 10,862,391 | $ | 3,929,347 | ||||||||||||||
I/C COS Charges | (483,532 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Direct COS | 18,916,468 | — | — | — | — | 4,400,380 | 4,277,238 | |||||||||||||||||||||
Total Cost of Sales | $ | 18,432,936 | $ | — | $ | — | $ | — | $ | — | $ | 4,400,380 | $ | 4,277,238 | ||||||||||||||
Gross Profit from Operations | $ | 4,418,984 | $ | — | $ | 2,440,649 | $ | — | $ | — | $ | 6,462,011 | $ | (347,891 | ) | |||||||||||||
Sales & Marketing | 976,341 | — | — | — | 223,981 | 103,170 | 338,429 | |||||||||||||||||||||
General & Administrative | 18,396,714 | 138,251 | — | 6,153 | — | 4,164,689 | 912,623 | |||||||||||||||||||||
Research & Development | 1,255,467 | — | — | — | — | — | — | |||||||||||||||||||||
Income/(Loss) Operations | $ | (16,209,538 | ) | $ | (138,251 | ) | $ | 2,440,649 | $ | (6,153 | ) | $ | (223,981 | ) | $ | 2,194,152 | $ | (1,598,943 | ) | |||||||||
Interest Income | (39,043 | ) | — | — | — | — | — | (17 | ) | |||||||||||||||||||
Interest and Other Expense (Income) | 1,914,378 | — | — | (1,650,566 | ) | (9,016 | ) | (10,170,289 | ) | (14,988 | ) | |||||||||||||||||
Total Interest/Other | 1,875,335 | — | — | (1,650,566 | ) | (9,016 | ) | (10,170,289 | ) | (15,005 | ) | |||||||||||||||||
Income (Loss) Before Tax | $ | (18,084,873 | ) | $ | (138,251 | ) | $ | 2,440,649 | $ | 1,644,413 | $ | (214,965 | ) | $ | 12,364,441 | $ | (1,583,938 | ) | ||||||||||
Income Taxes | — | — | — | — | — | — | 171,855 | |||||||||||||||||||||
Income (Loss) After Tax | $ | (18,084,873 | ) | $ | (138,251 | ) | $ | 2,440,649 | $ | 1,644,413 | $ | (214,965 | ) | $ | 12,364,441 | $ | (1,755,793 | ) | ||||||||||
Net Income (Loss) | $ | (18,084,873 | ) | $ | (138,251 | ) | $ | 2,440,649 | $ | 1,644,413 | $ | (214,965 | ) | $ | 12,364,441 | $ | (1,755,793 | ) | ||||||||||
(1) | Includes Kansas City Analytical Services, Inc. (Case No. 05-11348) and aai Development Services, Inc., (Del) (Case No. 05-11349). |
FORM MOR | Page 3 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., | Case No. 05-11341 (PJW) | |
Debtors. | Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
Applied Analytical | ||||||||||||||||||||||||||||
Industries Learning | aai Development | |||||||||||||||||||||||||||
Book Value as of: | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
October 31, 2005 | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No. 05-11345) | (Case No. 05-11347) | (Case No. 05-11350) | |||||||||||||||||||||
Cash and Cash Equivalents(2) | $ | 8,309,778 | $ | 1,050 | $ | 9,587 | $ | 8,586 | $ | 98,856 | ||||||||||||||||||
A/R Trade & Other | 10,453,348 | 133,852 | (6,236,200 | ) | 3,871,302 | |||||||||||||||||||||||
WIP | 3,814,636 | 2,958,400 | ||||||||||||||||||||||||||
Inventory | 1,893,995 | (7,454 | ) | 362 | ||||||||||||||||||||||||
Prepaid Expenses | 2,205,728 | 303 | 4,572 | 694,555 | ||||||||||||||||||||||||
Deferred Tax Assets | — | |||||||||||||||||||||||||||
Total Current Assets | $ | 26,677,485 | $ | 1,353 | $ | 133,852 | $ | 9,587 | $ | 13,158 | $ | (6,243,654 | ) | $ | 7,623,475 | |||||||||||||
Total Fixed Assets | 38,150,792 | 889,988 | 1,667,266 | |||||||||||||||||||||||||
Goodwill | 1,954,536 | |||||||||||||||||||||||||||
Intangibles | 6,542,045 | |||||||||||||||||||||||||||
Other Assets | 173,461 | 23,371 | 13,608,802 | (1 | ) | |||||||||||||||||||||||
Investment in Subs | 66,099,017 | (46,240,390 | ) | |||||||||||||||||||||||||
Total Assets | $ | 139,597,336 | $ | 891,341 | $ | 133,852 | $ | (46,230,803 | ) | $ | 36,529 | $ | 7,365,148 | $ | 9,290,740 | |||||||||||||
Accounts Payable | $ | 6,859,077 | $ | — | $ | — | $ | — | $ | — | $ | 638,212 | $ | 58,818 | ||||||||||||||
Customer Advances | 6,538,466 | — | — | — | — | — | 2,272,864 | |||||||||||||||||||||
Accrued Wages & Benefits | 1,816,197 | 13,216 | — | — | — | 11,250 | 446,943 | |||||||||||||||||||||
Interest Payable | 154,744 | — | — | — | — | 0 | (3 | ) | ||||||||||||||||||||
Deferred Product Revenue | — | — | — | — | — | — | — | |||||||||||||||||||||
Other Accrued Liabilities | 1,660,594 | — | — | — | — | 2,358,882 | 1,439,089 | |||||||||||||||||||||
Total Current Liabilities | $ | 17,029,079 | $ | 13,216 | $ | — | $ | — | $ | — | $ | 3,008,344 | $ | 4,217,712 | ||||||||||||||
Liabilities Subject to Compromise | 235,555,710 | 1,296,646 | (58,261,741 | ) | (73,805,074 | ) | 2,825,815 | 122,850,674 | (15,389,856 | ) | ||||||||||||||||||
Long Term Debt | 2,000,000 | — | — | — | — | (1 | ) | — | ||||||||||||||||||||
Other Long-Term Liabilities | 7,598 | — | — | — | — | — | — | |||||||||||||||||||||
Inter-Company | 38,457,649 | 100,922 | (290,746 | ) | (1,650,254 | ) | 146,138 | (41,514,366 | ) | 3,050,960 | ||||||||||||||||||
Total Liabilities | $ | 293,050,036 | $ | 1,410,784 | $ | (58,552,486 | ) | $ | (75,455,328 | ) | $ | 2,971,953 | $ | 84,344,652 | $ | (8,121,185 | ) | |||||||||||
Common Stock | 28,761 | — | 10 | 883,498 | ||||||||||||||||||||||||
Additional Paid in Capital | 96,021,063 | 100 | — | |||||||||||||||||||||||||
Retained Earnings | (214,803,879 | ) | (277,529 | ) | 50,149,267 | 26,867,494 | (2,609,480 | ) | (81,763,919 | ) | 16,660,081 | |||||||||||||||||
Current Year Retained Earnings | (34,692,291 | ) | (242,014 | ) | 8,537,071 | 2,357,021 | (325,944 | ) | 4,784,415 | (668,609 | ) | |||||||||||||||||
Deferred Compensation | (6,354 | ) | — | |||||||||||||||||||||||||
Other Capital Subs | — | 536,955 | ||||||||||||||||||||||||||
Total Equity | $ | (153,452,700 | ) | $ | (519,443 | ) | $ | 58,686,338 | $ | 29,224,525 | $ | (2,935,424 | ) | $ | (76,979,504 | ) | $ | 17,411,925 | ||||||||||
Total Equity & Liabilities | $ | 139,597,336 | $ | 891,341 | $ | 133,852 | $ | (46,230,803 | ) | $ | 36,529 | $ | 7,365,148 | $ | 9,290,740 | |||||||||||||
Applied Analytical | ||||||||||||||||||||||||||||
Industries Learning | aai Development | |||||||||||||||||||||||||||
Book Value as of: | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
Petition Date | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No. 05-11345) | (Case No. 05-11347) | (Case No. 05-11350) | |||||||||||||||||||||
Cash and Cash Equivalents | $ | 440,718 | $ | 550 | $ | — | $ | 15,427 | $ | 64,076 | $ | — | $ | 132,626 | ||||||||||||||
A/R Trade & Other | 10,225,049 | — | — | — | — | (3,378,994 | ) | 2,531,112 | ||||||||||||||||||||
WIP | 4,894,781 | — | — | — | — | — | 3,298,485 | |||||||||||||||||||||
Inventory | 2,168,709 | — | — | — | — | 4,809,835 | — | |||||||||||||||||||||
Prepaid Expenses | 4,017,739 | — | — | — | 17,909 | 8,235,448 | 529,875 | |||||||||||||||||||||
Deferred Tax Assets | — | — | — | — | — | — | — | |||||||||||||||||||||
Total Current Assets | $ | 21,746,997 | $ | 550 | $ | — | $ | 15,427 | $ | 81,984 | $ | 9,666,289 | $ | 6,492,097 | ||||||||||||||
Total Fixed Assets | 37,167,261 | 910,873 | — | — | — | 6,147,830 | 1,591,276 | |||||||||||||||||||||
Goodwill | 1,954,536 | — | — | — | — | 0 | — | |||||||||||||||||||||
Intangibles | 1,192,875 | — | — | — | — | 185,188,166 | — | |||||||||||||||||||||
Other Assets | 193,086 | — | — | — | 23,371 | 14,878,222 | (1 | ) | ||||||||||||||||||||
Investment in Subs | 66,099,017 | — | — | (46,240,390 | ) | — | — | — | ||||||||||||||||||||
Total Assets | $ | 128,353,771 | $ | 911,423 | $ | — | $ | (46,224,963 | ) | $ | 105,356 | $ | 215,880,508 | $ | 8,083,372 | |||||||||||||
Accounts Payable | $ | 2,468,700 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (9,548 | ) | |||||||||||||
Customer Advances | 7,581,794 | — | — | — | — | — | 2,525,506 | |||||||||||||||||||||
Accrued Wages & Benefits | 2,654,382 | 3,275 | — | — | — | 7,976 | 339,441 | |||||||||||||||||||||
Interest Payable | 175,961 | — | — | — | — | 506,627 | — | |||||||||||||||||||||
Deferred Product Revenue | — | — | — | — | — | — | — | |||||||||||||||||||||
Other Accrued Liabilities | 1,113,538 | — | 2,016,052 | — | — | 91 | 1,236,219 | |||||||||||||||||||||
Total Current Liabilities | $ | 13,994,375 | $ | 3,275 | $ | 2,016,052 | $ | — | $ | — | $ | 514,694 | $ | 4,091,619 | ||||||||||||||
Liabilities Subject to Compromise | $ | 235,524,112 | $ | 1,289,339 | $ | (58,261,741 | ) | $ | (73,805,074 | ) | $ | 2,825,815 | $ | 139,709,760 | $ | (15,102,840 | ) | |||||||||||
Long Term Debt | 14,280,474 | — | — | — | — | 165,000,000 | — | |||||||||||||||||||||
Other Long-Term Liabilities | 7,776 | — | — | — | — | — | — | |||||||||||||||||||||
Inter-Company | — | — | — | — | — | — | — | |||||||||||||||||||||
Total Liabilities | $ | 263,806,737 | $ | 1,292,614 | $ | (56,245,688 | ) | $ | (73,805,074 | ) | $ | 2,825,815 | $ | 305,224,454 | $ | (11,011,221 | ) | |||||||||||
Common Stock | 28,761 | — | — | 10 | — | — | 883,498 | |||||||||||||||||||||
Additional Paid in Capital | 96,021,063 | 100 | — | — | — | — | — | |||||||||||||||||||||
Retained Earnings | (214,803,879 | ) | (277,529 | ) | 50,149,267 | 26,867,494 | (2,609,480 | ) | (81,763,919 | ) | 16,660,081 | |||||||||||||||||
Current Year Retained Earnings | (16,607,412 | ) | (103,763 | ) | 6,096,422 | 712,607 | (110,979 | ) | (7,580,027 | ) | 1,087,187 | |||||||||||||||||
Deferred Compensation | (91,498 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Other Capital Subs | — | — | — | — | — | — | 463,828 | |||||||||||||||||||||
Total Equity | $ | (135,452,967 | ) | $ | (381,191 | ) | $ | 56,245,688 | $ | 27,580,111 | $ | (2,720,460 | ) | $ | (89,343,946 | ) | $ | 19,094,594 | ||||||||||
Total Equity & Liabilities | $ | 128,353,771 | $ | 911,423 | $ | — | $ | (46,224,963 | ) | $ | 105,356 | $ | 215,880,508 | $ | 8,083,372 | |||||||||||||
(1) | Includes Kansas City Analytical Services, Inc. (Case No. 05-11348) and aai Development Services, Inc., (Del) (Case No. 05-11349). | |
(2) | Cash balance as of October 31, 2005 per the balance sheet includes $6.3 million of restricted cash associated with the escrow account established as part of the Pharma sale. |
FORM MOR | Page 4 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
Applied Analytical | ||||||||||||||||||||||||||||
LIABILITIES | Industries Learning | aai Development | ||||||||||||||||||||||||||
SUBJECT TO | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
COMPROMISE | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No.05-11345) | (Case No. 05-11347) | (Case No. 05-11350)3 | |||||||||||||||||||||
Book Value as of October 31, 2005 | ||||||||||||||||||||||||||||
Accounts Payable & Other | $ | 1,547,644 | $ | 26,430 | $ | — | $ | — | $ | — | $ | 5,930,616 | $ | 268,742 | ||||||||||||||
Interest Payable | — | — | — | — | — | 12,811,310 | (119 | ) | ||||||||||||||||||||
Other Liabilities | 12,823,733 | — | — | — | — | 9,165,039 | 12,262 | |||||||||||||||||||||
Long Term Debt | — | — | — | — | — | 176,067,256 | — | |||||||||||||||||||||
Inter-Company | 221,184,333 | 1,270,216 | (58,261,741 | ) | (73,805,074 | ) | 2,825,815 | (81,123,547 | ) | (15,670,742 | ) | |||||||||||||||||
TOTAL | $ | 235,555,710 | $ | 1,296,646 | $ | (58,261,741 | ) | $ | (73,805,074 | ) | $ | 2,825,815 | $ | 122,850,674 | $ | (15,389,856 | ) | |||||||||||
Book Value as of Filing Date | ||||||||||||||||||||||||||||
Accounts Payable & Other | $ | 522,337 | $ | 19,123 | $ | — | $ | — | $ | — | $ | 9,143,747 | $ | 555,758 | ||||||||||||||
Interest Payable | — | — | — | — | — | 12,811,310 | (118 | ) | ||||||||||||||||||||
Other Liabilities | 13,817,443 | — | — | — | — | 22,810,992 | 12,262 | |||||||||||||||||||||
Long Term Debt | — | — | — | — | — | 176,067,258 | — | |||||||||||||||||||||
Inter-Company | 221,184,333 | 1,270,216 | (58,261,741 | ) | (73,805,074 | ) | 2,825,815 | (81,123,547 | ) | (15,670,742 | ) | |||||||||||||||||
TOTAL | $ | 235,524,112 | $ | 1,289,339 | $ | (58,261,741 | ) | $ | (73,805,074 | ) | $ | 2,825,815 | $ | 139,709,760 | $ | (15,102,840 | ) | |||||||||||
(1) | Includes Kansas City Analytical Services, Inc. (Case No. 05-11348) and aai Development Services, Inc., (Del) (Case No. 05-11349). |
FORM MOR | Page 5 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
By: | /s/ Matthew E. Czajkowski | |||
Matthew E. Czajkowski | ||||
Executive Vice President, Chief Financial Officer and Chief Administrative Officer |
FORM MOR | Page 6 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., Debtors. | Case No. 05-11341 (PJW) Reporting Period: October 1, 2005-October 31, 2005 |
NUMBER OF DAYS PAST DUE DATE(4) | ||||||||||||||||||||||||
BALANCE(1) | 0 - 30 | 31 - 60 | 61 - 90 | Over 90 | TOTAL | |||||||||||||||||||
Trade Accounts Payable: | ||||||||||||||||||||||||
aaiPharma Inc. (Case No. 05-11341)(1) (2) | $ | 145,892 | $ | 118,821 | $ | 16,888 | $ | 1,627 | $ | 8,556 | $ | 145,892 | ||||||||||||
Applied Analytical Industries Learning Center, Inc. (Case No. 05-11342) | — | — | — | — | — | — | ||||||||||||||||||
aai Properties, Inc. (Case No. 05-11343) | — | — | — | — | — | — | ||||||||||||||||||
aai Technologies, Inc. (Case No. 05-11344) | — | — | — | — | — | — | ||||||||||||||||||
aai Japan, Inc. (Case No. 05-11345) | — | — | — | — | — | — | ||||||||||||||||||
aaiPharma, LLC (Case No. 05-11347) | 564,840 | 563,772 | — | — | 1,068 | 564,840 | ||||||||||||||||||
aai Development Services, Inc. (Mass) (Case No. 05-11350)(2) (3) | 2,788 | (1,815 | ) | 4,030 | — | 573 | 2,788 | |||||||||||||||||
TOTAL POSTPETITION TRADE ACCOUNTS PAYABLE | $ | 713,520 | $ | 680,778 | $ | 20,918 | $ | 1,627 | $ | 10,197 | $ | 713,520 | ||||||||||||
(1) | Includes Kansas City Analytical Services, Inc. (Case No. 05-11348) and aai Development Services, Inc., (Del) (Case No. 05-11349). | |
(2) | Includes small amounts with disputed invoice dates. | |
(3) | aai Development Services, Inc. (Mass) includes accounts payable related to the company’s Canadian operations. The accounts payable related to the Canadian operations is converted to $USD assuming an exchange rate of $1.1771 USD:CAD. | |
(4) | The chart above includes a significant amount of trade accounts payable as past due date. The Debtors define “Past Due Date” as the number of days past Invoice Date + Invoice Terms (if any). The Debtors would note two items with regard to these amounts. First, in the normal course, the Debtors “post” Invoices to their Accounts Payable system as they are received and approved. Many of these invoices, however, are “Due Upon Receipt” or are due on shortened trade terms. As such, because of the time it takes for the Debtors to receive, approve, and post their Invoices, many invoices are “Past Due” by the time they are posted to the Debtors’ Accounts Payable system. |
FORM MOR | Page 7 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., | Case No. 05-11341 (PJW) | |
Debtors. | Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
Applied Analytical | ||||||||||||||||||||||||||||
ACCOUNTS RECEIVABLE | Industries Learning | aai Development | ||||||||||||||||||||||||||
RECONCILIATION | aaiPharma Inc.(1) | Center, Inc. | aai Properties, Inc. | aai Technologies, Inc. | aai Japan, Inc. | aaiPharma, LLC | Services, Inc. (Mass) | |||||||||||||||||||||
As of: June 30, 2005 | (Case No. 05-11341) | (Case No. 05-11342) | (Case No. 05-11343) | (Case No. 05-11344) | (Case No. 05-11345) | (Case No. 05-11347) | (Case No. 05-11350)(3) | |||||||||||||||||||||
Current | $ | 5,056,334 | $ | — | $ | — | $ | — | $ | — | $ | 103,769 | $ | 1,430,519 | ||||||||||||||
0 - 30 days past due | 2,885,469 | — | — | — | — | (249,293 | ) | 965,160 | ||||||||||||||||||||
31 - 60 days past due | 440,792 | — | — | — | — | (566,369 | ) | 227,163 | ||||||||||||||||||||
61 - 90 days past due | 756,612 | — | — | — | — | 840,169 | 95,245 | |||||||||||||||||||||
91+ days past due | 3,851,494 | — | — | — | — | 3,217,771 | 100,185 | |||||||||||||||||||||
Total Accounts Receivable, gross | $ | 12,990,701 | $ | — | $ | — | $ | — | $ | — | $ | 3,346,048 | $ | 2,818,272 | ||||||||||||||
Allowance for Doubtful Accounts | (2,605,408 | ) | — | — | — | — | (167,000 | ) | — | |||||||||||||||||||
Chargeback Reserve | — | — | — | — | — | (3,639,366 | ) | — | ||||||||||||||||||||
Rebate Reserve | — | — | — | — | — | (108,079 | ) | — | ||||||||||||||||||||
Cash Discount Reserve | — | — | — | — | — | (144,523 | ) | — | ||||||||||||||||||||
Returns Reserve | — | — | — | — | — | (4,331,679 | ) | — | ||||||||||||||||||||
Other A/R (2) | 68,055 | — | 133,852 | — | — | (1,191,601 | ) | 1,053,030 | ||||||||||||||||||||
Total Accounts Receivable, net (ending balance) | $ | 10,453,348 | $ | — | $ | 133,852 | $ | — | $ | — | $ | (6,236,200 | ) | $ | 3,871,302 | |||||||||||||
(1) | Includes Kansas City Analytical Services, Inc. (Case No. 05-11348) and aai Development Services, Inc., (Del) (Case No. 05-11349). | |
(2) | aaiPharma Inc. and aai Development Services, Inc. (Mass) primarily consists of unbilled accounts receivable. | |
(3) | There is a $244 variance between the aai Development Services, Inc. (Mass) accounts receivable aging and the general ledger due to foreign exchange conversion related to the Canadian operations. |
FORM MOR | Page 8 of 9 | 11/21/2005 |
DISTRICT OF DELAWARE
In re: AAIPHARMA INC., et al., | Case No. 05-11341 (PJW) | |
Debtors. | Reporting Period: October 1, 2005 — October 31, 2005 |
($USD in real numbers)
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. | o | þ | |||
2 | Have any funds been disbursed from any account other than a debtor in possession accounts this reporting period? If yes, provide an explanation below.(1) | o | þ | |||
3 | Have all postpetition tax returns been timely filed? (2) If no, provide an explanation below. | o | þ | |||
4 | Are workers compensation, general liability and other necessary insurance coverages in effect? If no, provide an explanation below. | þ | o |
(1) | Pursuant to the Bankruptcy Court’s Order authorizing the Debtors to, among other things, maintain prepetition accounts, which had been entered on an interim basis on May 11, 2005, June 6, 2005, and June 27, 2005, and has been entered on a final basis on July 18, 2005, the Debtors are authorized to, among other things, (i) designate, maintain, and continue to use any or all of their existing bank accounts in the names and with the account numbers existing immediately prior to the Petition Date, provided that the Debtors set up significant gaps (of no less than 25 checks, and at least to the next hundredth), in numbering between checks issued prior to the Petition Date and checks issued after the Petition Date, and (ii) treat their prepetition bank accounts for all purposes as debtor in possession accounts on a final basis. | |
(2) | Certain tax returns due October 15, 2005 were not timely filed as our previous tax return preparers, Ernst & Young, did not seek approval from the Bankruptcy Court to perform work or incur fees related to these returns. The Debtors had not previously filed state tax returns in these specific states. The Debtors will file these returns as soon as practicable. |
FORM MOR | Page 9 of 9 | 11/21/2005 |
Summary of Adjustments to Monthly Operating Reports: | 11/14/2005 |
Increase | ||||||||||||||||||||
Net Income | (Decrease) to | |||||||||||||||||||
MOR Period | As Filed | Revised | Change | Adjusting Entries | Net Income | |||||||||||||||
May | (3,321,080 | ) | (3,172,548 | ) | 148,532 | Adjust prepaid financing amortization | 148,532 | aaiPharma LLC | ||||||||||||
June | (10,499,745 | ) | (12,057,459 | ) | (1,557,714 | ) | Additional WIP reserve—non-clinical | (121,160 | ) | AAIPharma Inc. | ||||||||||
Adjust prepaid financing amortization | 209,294 | aaiPharma LLC | ||||||||||||||||||
Move Brethine intangible write-down from July | (1,189,848 | ) | aaiPharma LLC | |||||||||||||||||
Additional WIP reserve—clinical | (456,000 | ) | aai Development Services (MA) | |||||||||||||||||
(1,557,714 | ) | |||||||||||||||||||
July | 5,622,328 | 7,021,467 | 1,399,139 | Move Brethine intangible write-down to June | 1,183,839 | aaiPharma LLC | ||||||||||||||
Reverse Brethine amort expense | 6,009 | aaiPharma LLC | ||||||||||||||||||
Adjust prepaid financing amortization | 209,294 | aaiPharma LLC | ||||||||||||||||||
1,399,142 | ||||||||||||||||||||
August | (2,728,970 | ) | (2,519,676 | ) | 209,294 | Adjust prepaid financing amortization | 209,294 | aaiPharma LLC | ||||||||||||
Sept | (3,961,224 | ) | 6,393,968 | 10,355,192 | Additional WIP reserve—non-clinical | (71,837 | ) | AAIPharma Inc. | ||||||||||||
Pharma recall sales reserve | (197,000 | ) | AAIPharma Inc. | |||||||||||||||||
Adjust prepaid financing amortization | 209,294 | aaiPharma LLC | ||||||||||||||||||
Additional gain on pharma asset sale | 13,108,015 | aaiPharma LLC | ||||||||||||||||||
Amort of pharma intangible | (289,000 | ) | aaiPharma LLC | |||||||||||||||||
Pharma recall expenses and reserves | (532,000 | ) | aaiPharma LLC | |||||||||||||||||
Pharma reserve adjustments | (1,553,280 | ) | aaiPharma LLC | |||||||||||||||||
Additional WIP reserve—clinical | (319,000 | ) | aai Development Services (MA) | |||||||||||||||||
10,355,192 | ||||||||||||||||||||
Cumulative adjustments | 10,554,446 | |||||||||||||||||||
AAIPharma Inc. | (389,997 | ) | ||||||||||||||||||
aaiPharma LLC | 11,719,443 | |||||||||||||||||||
aai Development Services (MA) | (775,000 | ) | ||||||||||||||||||
10,554,446 | ||||||||||||||||||||
• | The prepayment of amortization on the Debtors’ financing: The Debtors reversed previously recorded amortization expense of deferred financing costs related to their senior subordinated debt. The Debtors had previously determined that this debt is undersecured; therefore under the relevant accounting guidance (AICPA Statement of Position 90-7) amortization of these costs should be suspended; | ||
• | Taking additional WIP reserve (both clinical and non-clinical): The Debtors recorded additional work-in-process reserves primarily related to a long-term clinical project that was terminated early by a client for which significant work had already been performed. The Debtors are currently in negotiations with this client over the final terms of the termination and have estimated its additional reserve needs; | ||
• | Moving the write down with regard to certain Brethine-related items from July to June; | ||
• | Reversal of Brethine amortization expenses; | ||
• | Adjustment of the recall sales reserves related to the Sale: The Debtors recorded a reserve for the estimated costs related to the anticipated recall of a product it manufactured. Additional reserves were recorded to revenue related to product that may be returned in this anticipated recall; | ||
• | Recognized additional gain attributable to the Sale: Additional review of the terms of the Pharma division asset sale resulted in certain adjustments to the gain on the sale previously recorded. Under the appropriate accounting guidance, certain elements covered by the sale agreement have now been included as consideration in determining the selling price and needed to be included in the determination of the gain on sale; | ||
• | Adjusting the amortization of intangible assets relating to the Sale; | ||
• | Adjusting recall expenses related to the Sale; and |
• | Adjusting reserved amounts relating to the Sale. |