Exhibit 99.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
| In re Akorn, Inc., et al. | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 1, 2020 - July 31, 2020 |
MONTHLY OPERATING REPORT
Submit copy of report to any official committee appointed in the case.
| | | | | Document | | Explanation | | Affidavit/Supplement |
| REQUIRED DOCUMENTS | | Form No. | | Attached | | Attached | | Attached |
| Schedule of Cash Receipts and Disbursements | | MOR-1 | | X | | | | |
| Bank Reconciliation (or copies of debtor's bank reconciliations) | | MOR-1a | | X | | See Attestation | | X |
| Schedule of Professional Fees Paid | | MOR-1b | | X | | | | |
| Copies of bank statements | | | | | | X | | |
| Cash disbursements journals | | | | | | X | | |
| Statement of Operations | | MOR-2 | | X | | | | |
| Balance Sheet | | MOR-3 | | X | | | | |
| Status of Postpetition Taxes | | MOR-4 | | X | | See Attestation | | X |
| Copies of IRS Form 6123 or payment receipt | | | | | | X | | |
| Copies of tax returns filed during reporting period | | | | | | X | | |
| Summary of Unpaid Postpetition Debts | | MOR-4 | | X | | X | | |
| Listing of aged accounts payable | | MOR-4 | | X | | | | |
| Accounts Receivable Reconciliation and Aging | | MOR-5 | | X | | | | |
| Debtor Questionnaire | | MOR-5 | | X | | | | |
I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.
| | | |
| Signature of Debtor | | Date |
| | | |
| | | |
| | | |
| Signature of Joint Debtor | | Date |
| | | |
| | | |
| /s/ Duane Portwood | | August 28, 2020 |
| Signature of Authorized Individual* | | Date |
| | | |
| | | |
| Duane Portwood | | Chief Financial Officer |
| Printed Name of Authorized Individual | | Title of Authorized Individual |
*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.
| In re Akorn, Inc., et al. | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 1, 2020 - July 31, 2020 |
| Notes to the Monthly Operating Report |
General:
The report includes activity from the following Debtors and related Case Numbers:
| Debtors | | Case Number | Debtors | | Case Number |
| Akorn, Inc. | | Case 20-11177 | Covenant Pharma, Inc. | | Case 20-11188 |
| 10 Edison Street LLC | | Case 20-11178 | Hi-Tech Pharmacal Co., Inc. | | Case 20-11189 |
| 13 Edison Street LLC | | Case 20-11180 | Inspire Pharmaceuticals, Inc. | | Case 20-11190 |
| Advanced Vision Research, Inc. | | Case 20-11182 | Oak Pharmaceuticals, Inc. | | Case 20-11192 |
| Akorn (New Jersey), Inc. | | Case 20-11183 | Olta Pharmaceuticals Corp. | | Case 20-11191 |
| Akorn Animal Health, Inc. | | Case 20-11185 | VersaPharm Incorporated | | Case 20-11194 |
| Akorn Ophthalmics, Inc. | | Case 20-11186 | VPI Holdings Corp. | | Case 20-11193 |
| Akorn Sales, Inc. | | Case 20-11174 | VPI Holdings Sub, LLC | | Case 20-11195 |
| Clover Pharmaceuticals Corp. | | Case 20-11187 | | | |
Notes to the MOR:
This Monthly Operating Report ("MOR") has been prepared solely for the purpose of complying with the monthly reporting requirements applicable in the bankruptcy cases and is in a format acceptable to the U.S. Trustee. The financial information contained herein is unaudited, limited in scope and as discussed below, is not prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) nor in accordance with federal or state securities laws or other applicable non-bankruptcy law or in lieu of complying with any periodic reporting requirements thereunder.
The unaudited financial statements have been derived from the books and records of the Debtors. The information furnished in this report includes primarily normal recurring adjustments, but not all the adjustments that would typically be made for the quarterly and annual financial statements to be in accordance with U.S. GAAP. Furthermore, the monthly financial information contained herein has not been subjected to the same level of accounting review and testing that Akorn, Inc., and related Debtors apply in the preparation of its quarterly and annual financial information in accordance with U.S. GAAP. Accordingly, upon the application of such procedures, the Debtors believe that the financial information may be subject to change, and these changes could be material.
The financial statements presented in MOR-2 and MOR-3 do not include elimination entries for intercompany balances related to non-debtor affiliates. Investments in subsidiary balances are recorded at cost which may not be in accordance with U.S. GAAP. The amounts currently classified as liabilities subject to compromise may be subject to future change as the Company completes its analysis of prepetition liabilities.
The results of operations contained herein are not necessarily indicative of results which may be expected from any other period or for the full year and may not necessarily reflect the results of consolidated operations, financial position and cash flows of the Debtors in the future. The Debtors caution readers not to place undue reliance upon the MOR. There can be no assurance that such information is complete and the MOR may be subject to revision.
Notes to MOR-1a:
The Debtors maintain 6 total bank accounts (collectively, the “Bank Accounts”) at two financial institutions (the “Banks”). The Bank Accounts vary in purpose and function.
Notes to MOR-2:
The Income Statement reflects revenue and expenses for the Month of July, 2020 on a consolidated basis for the US Debtor entities.
Notes to MOR-3:
The Balance Sheet reflects assets, liabilities, and stockholders equity on a consolidated basis for the US Debtor entities.
As a result of the commencement of these Chapter 11 Cases, the payment of pre-petition indebtedness is subject to compromise or other treatment under a Chapter 11 plan. The Bankruptcy Court authorized the Debtors to pay certain prepetition claims, including but not limited to general trade and tax claims. To the extent such claims have been categorized as “Liabilities Not Subject to Compromise,” the Debtors reserve their right to dispute their obligation to make such payments. The Debtors have been paying and intend to continue to pay undisputed post-petition claims arising in the ordinary course of business.
The liability information, except as otherwise noted, is listed as of the close of business as of the end of the month. Accordingly, the Debtors reserve all rights to amend, supplement or otherwise modify this Monthly Operating Report as necessary and appropriate, but shall be under no obligation to do so. The Debtors have paid certain prepetition liabilities in accordance with orders approved by the Bankruptcy Court authorizing such payments. The Debtors believe that all undisputed post-petition accounts payable have been and are being paid according to agreed-upon terms specific to each vendor and/or service provider and as authorized by the Bankruptcy Court. Payments are limited to payments made to vendors and service providers who provide services that are necessary to the operation of the Debtors’ business. In addition, the liabilities reported in this Monthly Operating Report do not reflect any analysis conducted by the Debtors regarding potential claims under section 503(b)(9) of the Bankruptcy Code. Accordingly, the Debtors reserve any and all of their rights to dispute or challenge the validity of any claims asserted under section 503(b)(9) of the Bankruptcy Code or the characterization of the structure of any transaction, document or instrument related to any creditor’s claim.
Notes to MOR-4:
Akorn, Inc., and related Debtors received authority pursuant to certain first-day orders for the payment of prepetition taxes and certain other prepetition liabilities. The Debtors are current on all post petition payables other than disputes that arise in the ordinary course of business. While an accounts payable aging is presented for trade accounts payable, all other post-petition liabilities are current and presented as such on MOR 3.
Notes to MOR-5:
The Debtors reconcile and age individual customer accounts receivables in the normal course of the Debtors' operations.
| In re Akorn, Inc., et al. | | MOR - 1 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 1, 2020 - July 31, 2020 |
| | | |
| SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS |
Actual Cash Activity (7/1/2020-7/31/2020)
USD in 000s
| Case No. | | 20-11177 | | 20-11182 | | 20-11183 | | 20-11189 | | 20-11178 | | 20-11180 | | 20-11185 | | 20-11186 | | 20-11174 | | 20-11187 | | 20-11188 | | 20-11190 | | 20-11192 | | 20-11191 | | 20-11194 | | 20-11193 | | 20-11195 | | |
| Debtor Entity Names | | Akorn, Inc. | | Advanced Vision Research, Inc. | | Akorn (New Jersey), Inc. | | Hi-Tech Pharmacal Co., Inc. | | 10 Edison Street LLC | | 13 Edison Street LLC | | Akorn Animal Health, Inc. | | Akorn Ophthalmics, Inc. | | Akorn Sales, Inc. | | Clover Pharmaceuticals Corp. | | Covenant Pharma, Inc. | | Inspire Pharmaceuticals, Inc. | | Oak Pharmaceuticals, Inc. | | Olta Pharmaceuticals Corp. | | VersaPharm Incorporated | | VPI Holdings Corp. | | VPI Holdings Sub, LLC | | Total |
| RECEIPT | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Customer Receipts | | 39,893 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 39,893 |
| Other Receipts | | 4 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 4 |
| Total Receipts | | 39,897 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 39,897 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATING DISBURSEMENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Royalties | | - | | - | | - | | 313 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 313 |
| Payroll | | 10,487 | | - | | 2,461 | | 3,379 | | - | | - | | - | | - | | 1,043 | | - | | - | | - | | - | | - | | - | | - | | - | | 17,370 |
| Vendor Payments | | 27,369 | | 67 | | 2,304 | | 6,561 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 36,301 |
| Capex | | 483 | | - | | 214 | | 61 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 757 |
| Taxes | | 250 | | - | | - | | - | | - | | - | | - | | - | | 17 | | - | | - | | - | | - | | - | | - | | - | | - | | 267 |
| Intercompany Trade | | 5,200 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 5,200 |
| FDA Remediation | | 235 | | - | | 117 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 352 |
| Total Operating Disbursements | | 44,023 | | 67 | | 5,096 | | 10,314 | | - | | - | | - | | - | | 1,060 | | - | | - | | - | | - | | - | | - | | - | | - | | 60,560 |
| NON-RECURRING | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Professional Fees (Financial & Legal)1 | | 895 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 895 |
| Interest Payments and Fees | | 10,512 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 217 |
| Intercompany Funding | | 217 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 10,512 |
| Total Non-recurring Disbursements | | 11,625 | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | - | | 11,625 |
| Total Disbursements | | 55,648 | | 67 | | 5,096 | | 10,314 | | - | | - | | - | | - | | 1,060 | | - | | - | | - | | - | | - | | - | | - | | - | | 72,185 |
| US TRUSTEE FEE CALCULATIONS ($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| US Trustee Fees | | 250,000 | | 650 | | 50,958 | | 103,143 | | 375 | | 375 | | 375 | | 375 | | 10,600 | | 375 | | 375 | | 375 | | 375 | | 375 | | 375 | | 375 | | 375 | | 419,851 |
Note
[1] Includes fees for both retained and non-retained professionals.
| In re Akorn, Inc., et al. | | MOR - 1a |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 31, 2020 |
| | | |
| BANK ACCOUNT INFORMATION |
| Whole Values |
| Legal Entity | | Bank | | Last 4 Digit of Account
Number | | Description | | Bank Balance | |
| Akorn, Inc. | | Bank of America | | 8391 | | Collections and Concentration | | 29,201,964 | |
| Akorn, Inc. | | Bank of America | | 6603 | | Operating Disbursements | | 30,078 | |
| Akorn, Inc. | | Bank of America | | 0893 | | Payroll Disbursements | | 52,200 | |
| Akorn, Inc. | | Bank of America | | 8409 | | Treasury Activity | | 37,564 | |
| Akorn, Inc. | | Bank of America | | 8878 | | Utilities Adequate Assurance Account | | 362,526 | |
| Akorn, Inc. | | Wilmington Savings Fund Society Bank | | 4323 | | Debtor in Possession / DACA | | 25,211,626 | |
| In re Akorn, Inc., et al. | | MOR - 1a |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 31, 2020 |
BANK RECONCILIATION
The above-captioned debtors (the "Debtors") hereby submit this attestation regarding bank account reconciliations in lieu of providing copies of bank statements, journals, and account reconciliations.
I attest that each of the Debtors' bank accounts is reconciled to bank statements. The Debtors' standard practice is to ensure that each bank account is reconciled to bank statements once per month within 31 days after the month end.
| /s/ Duane Portwood | | August 28, 2020 | |
| Signature of Authorized Individual* | | Date | |
| | | | |
| | | | |
| Duane Portwood | | Chief Financial Officer | |
| Printed Name of Authorized Individual | | Title of Authorized Individual | |
*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.
| In re Akorn, Inc., et al. | | MOR - 1b |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 31, 2020 |
SCHEDULE OF RETAINED PROFESSIONAL FEES PAID
| | | | | Amount Paid | | Cumulative Payments
Since Filing | |
| Payee | | Role of Professional | | | Fees | | | Expenses | | | Fees | | | Expenses | |
| KIRKLAND & ELLIS LLP | | DEBTORS' COUNSEL | | $ | - | | $ | - | | $ | - | | $ | - | |
| RICHARDS LAYTON & FINGER | | DEBTORS' COUNSEL | | $ | - | | $ | - | | $ | - | | $ | - | |
| PJT PARTNERS | | DEBTORS' INVESTMENT BANKER | | $ | - | | $ | - | | $ | - | | $ | - | |
| PRICEWATERHOUSECOOPERS CORPORATE FINANCE LLC | | DEBTORS' INVESTMENT BANKER | | $ | - | | $ | - | | $ | - | | $ | - | |
| ALIXPARTNERS LLP | | DEBTORS' FINANCIAL ADVISOR | | $ | - | | $ | - | | $ | - | | $ | - | |
| GRANT THORNTON LLP | | DEBTORS' FINANCIAL ADVISOR | | $ | - | | $ | - | | $ | - | | $ | - | |
| KURTZMAN CARSON CONSULTANTS INC1 | | DEBTORS' ADMINISTRATIVE ADVISOR | | $ | 53,226 | | $ | 31,557 | | $ | 53,226 | | $ | 31,557 | |
| JENNER & BLOCK | | COMMITTEE COUNSEL | | $ | - | | $ | - | | $ | - | | $ | - | |
| SAUL EWING ARNSTEIN & LEHR | | COMMITTEE COUNSEL | | $ | - | | $ | - | | $ | - | | $ | - | |
| HURON CONSULTING GROUP | | COMMITTEE FINANCIAL ADVISOR | | $ | - | | $ | - | | $ | - | | $ | - | |
Note:
[1] Payments to Kurtzman Carson Consultants LLC (“KCC”), as disclosed herein, include amounts paid to KCC pursuant to the Order Authorizing Retention and Appointment of Kurtzman Carson Consultants LLC as Claims and Noticing Agent [Docket No. 76]
| In re Akorn, Inc., et al. | | MOR - 2 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 31, 2020 |
UNAUDITED
STATEMENT OF OPERATIONS (INCOME STATEMENT)
| | | Consolidated | |
| Net Revenue | | | 41,293 | |
| | | | | |
| COGS | | | 27,508 | |
| | | | | |
| Gross Profit | | | 13,785 | |
| | | | | |
| SG&A | | | 15,958 | |
| Research & Development | | | 3,312 | |
| Amortization of Intangibles | | | 2,051 | |
| Goodwill Impairment | | | - | |
| Impairment of intangibles | | | - | |
| Litigation (Gain) Loss | | | - | |
| | | | | |
| Operating Income | | | (7,536 | ) |
| | | | | |
| Interest expense, net | | | 11,520 | |
| Deferred Financing Costs | | | - | |
| Other | | | (32 | ) |
| Bankruptcy | | | 3,183 | |
| Income Tax | | | - | |
| | | | | |
| Net Income | | | (22,207 | ) |
Note:
The numbers presented above should be viewed in conjunction with the notes at the beginning of the MOR.
| In re Akorn, Inc., et al. | | MOR - 3 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Balance as of: | July 31, 2020 |
UNAUDITED
BALANCE SHEET
| (Units in 000's) | | | |
| | | Consolidated | |
| Assets: | | | | |
| | | | | |
| Cash | | | 46,753 | |
| Accounts Receivable | | | 136,988 | |
| Accounts Receivable (intercompany) | | | 1,527 | |
| Inventory | | | 178,684 | |
| Other | | | 79,153 | |
| Other (Intercompany Loan - HETT) | | | 1,830 | |
| Current Assets | | | 444,935 | |
| | | | | |
| PP&E, Net | | | 216,765 | |
| Goodwill | | | - | |
| Product License Rights | | | 201,056 | |
| Other | | | 30,819 | |
| Long-term Assets | | | 233,040 | |
| | | | | |
| Total Assets | | | 1,126,615 | |
| | | | | |
| Liabilities: | | | | |
| | | | | |
| Liabilities Subject to Compromise | | | 74,867 | |
| Accounts Payable | | | 29,451 | |
| Accounts Payable (Intercompany) | | | 1,364 | |
| Income Taxes Payable | | | (10 | ) |
| Accrued Royalties | | | 2,871 | |
| Accrued Compensation | | | 14,904 | |
| Other Current Liabilities | | | 82,243 | |
| Current Portion of LTD | | | 855,781 | |
| Current Liabilities | | | 986,604 | |
| | | | | |
| Long-term Debt | | | | |
| Other | | | 2,741 | |
| Long-term Liabilities | | | 2,741 | |
| | | | | |
| Total Liabilities | | | 1,064,212 | |
| | | | | |
| Shareholders' Equity: | | | | |
| | | | | |
| Common Stock | | | 608,829 | |
| Retained Earnings | | | (546,389 | ) |
| Accumulated Other Comprehensive Loss | | | (37 | ) |
| Total Shareholders' Equity | | | 62,403 | |
| | | | | |
| Liabilities & Shareholders' Equity: | | | 1,126,615 | |
Note:
The numbers presented above should be viewed in conjunction with the notes at the beginning of the MOR.
| In re Akorn, Inc., et al. | | MOR - 4 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 31, 2020 |
STATUS OF POST-PETITION TAXES
The above-captioned debtors (the "Debtors") hereby submit this attestation regarding Status of Post-petition Taxes in lieu of providing copies of post-petition tax payments and tax returns filed during reporting period.
I attest that each of the Debtors' taxing authorities have been paid on time when post-petition amounts become due. Also, tax returns are being filed in an orderly and timely fashion in accordance with tax return reporting deadlines.
| /s/ Duane Portwood | | August 28, 2020 | |
| Signature of Authorized Individual* | | Date | |
| | | | |
| | | | |
| Duane Portwood | | Chief Financial Officer | |
| Printed Name of Authorized Individual | | Title of Authorized Individual | |
*Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor
is a partnership; a manager or member if debtor is a limited liability company.
| In re Akorn, Inc., et al. | | MOR - 4 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Balance as of: | July 31, 2020 |
ACCOUNTS PAYABLE AGING
| As of July 31, 2020 | | | Current | | | | 0-30 Days | | | | 31 - 60 Days | | | | 61 - 90 Days | | | | >90 Days | | | | Total | |
| Accounts Payables | | $ | 25,461,806 | | | $ | 1,673,878 | | | $ | 285,397 | | | $ | 1,586,625 | | | $ | 443,294 | | | $ | 29,451,000 | |
| Percentage of Total | | | 66 | % | | | 14 | % | | | 2 | % | | | 14 | % | | | 4 | % | | | 100 | % |
| In re Akorn, Inc., et al. | | MOR - 5 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Balance as of: | July 31, 2020 |
| | | |
| ACCOUNTS RECEIVABLE AGING AND RECONCILIATION |
| As of July 31, 2020 | | Current | | | 0-30 Days | | | 31 - 60 Days | | | 61 - 90 Days | | | > 90 Days | | | Total | |
| Gross Accounts Receivables | | $ | 216,189,160 | | | $ | 15,684,175 | | | $ | 113,435,175 | | | $ | 21,082,273 | | | $ | 12,804,615 | | | $ | 379,195,398 | |
| Percentage of Total | | | 57 | % | | | 4 | % | | | 30 | % | | | 6 | % | | | 3 | % | | | 100 | % |
| Gross to Net Accounts Receivable as of July 31, 2020 | | Amount | |
| Total Gross Accounts Receivable at the end of the reporting period | | | 379,195,398 | |
| - Reserves for: Chargebacks, Rebates, Other | | | (242,207,432 | ) |
| Total Net Accounts Receivable at the end of the reporting period | | | 136,987,965 | |
| In re Akorn, Inc., et al. | | MOR - 6 |
| Debtors | Case No. (Jointly Administered): | 20-11177 |
| | Reporting Period: | July 1, 2020 - July 31, 2020 |
| | | |
| DEBTORS QUESTIONNAIRE |
| | | |
| Must be completed each month | | Yes | | No |
| 1. | Have any assets been sold or transferred outside the normal course of business this reporting period? If yes, provide an explanation below. | | | | X |
| 2. | Have any funds been disbursed from any account other than a debtor in possession account this reporting period? If yes, provide an explanation below. | | | | X |
| 3. | Have all postpetition tax returns been timely filed? If no, provide an explanation below. | | X | | |
| 4. | Are workers compensation, general liability and other necessary insurance coverages in effect? If no, provide an explanation below. | | X | | |
| 5. | Has any bank account been opened during the reporting period? If yes, provide documentation identifying the opened account(s). If an investment account has been opened provide the required documentation pursuant to the Delaware Local Rule 4001-3. | | | | X |
