Attached files
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8-K - FORM 8-K - K-V Pharmaceutical Co | kvpc_8k-092112.htm |
Exhibit 99.1
United States Bankruptcy Court
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Southern District of New York
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X
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In re:
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:
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Chapter 11
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:
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K-V Discovery Solutions, Inc. et al.:
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:
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Case No. 12-13346 (ALG)
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:
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Debtors.
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X
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Jointly Administered
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Monthly Operating Report for the Period
From August 4, 2012 to August 31, 2012
Debtors' Address:
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2280 Schuetz Road
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St. Louis, Missouri 63146
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Telephone: (314) 645-6000
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Debtors' Attorneys:
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Willkie Farr & Gallagher LLP
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787 Seventh Avenue
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New York, New York 10019
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Telephone: (212) 728-8000
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This Monthly Operating Report ("MOR") has been prepared solely for the purposes of complying with the monthly reporting requirements applicable in these Chapter 11 cases and is in a format that the Debtors believe is acceptable to the United States Trustee. The financial information contained herein is limited in scope and covers a limited time period. Moreover, such information is preliminary and unaudited, and is not prepared in accordance with accounting principles generally accepted in the United States ("GAAP").
I declare under penalty of perjury that this report and the attached documents are true and correct to the best of my knowledge and belief.
/s/ Thomas S. McHugh
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September 21, 2012
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Thomas S. McHugh
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Chief Financial Officer
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K-V Pharmaceutical Company
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- 1 -
In re
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K-V DISCOVERY SOLUTIONS, INC., et al.
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Case No.
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12-13346
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Debtors.
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Reporting Period:
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8/4/12 - 8/31/12 1
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Federal Tax I.D.#
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13-1587982
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CORPORATE MONTHLY OPERATING REPORT
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File with the Court and submit a copy to the United States Trustee within 20 days after the end of the month and submit a copy of the report to any official committee appointed in the case.
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(Reports for Rochester and Buffalo Divisions of Western District of New York are due 15 days after the end of the month, as are the reports for Southern District of New York.)
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REQUIRED DOCUMENTS
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Form No.
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Document Attached
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Explanation Attached
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Schedule of Cash Receipts and Disbursements
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MOR-1
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x
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Bank Reconciliation (or copies of debtor's bank reconciliations)
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MOR-1 (CON'T)
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x
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Copies of bank statements
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x
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Cash disbursements journals
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x
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Statement of Operations
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MOR-2
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x
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Balance Sheet
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MOR-3
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x
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Status of Post-petition Taxes
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MOR-4
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x
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x
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Copies of IRS Form 6123 or payment receipt (See Notes to MOR 4)
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x
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Copies of tax returns filed during reporting period (See Notes to MOR 4)
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x
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Summary of Unpaid Post-petition Debts (See Notes to MOR 4)
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MOR-4
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x
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Listing of Aged Accounts Payable (See MOR 7)
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x
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Accounts Receivable Reconciliation and Aging
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MOR-5
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x
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Taxes Reconciliation and Aging (See MOR 7)
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MOR-5
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x
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Payments to Insiders and Professional
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MOR-6
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x
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Post Petition Status of Secured Notes, Leases Payable
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MOR-6
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x
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Debtor Questionnaire
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MOR-7
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x
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Makena® Performance Metrics
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x
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1
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Each of the Debtors filed a voluntary petition for relief under chapter 11 of title 11 of the U.S. Bankruptcy Code on August 4, 2012. Unless otherwise noted herein, all information presented in this MOR is for the post-petition period of August 4, 2012 through August 31, 2012.
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- 2 -
NOTES TO MONTHLY OPERATING REPORT
The Monthly Operating Report includes activity from the following Debtors:
Debtor
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Case Number
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K-V Discovery Solutions, Inc.
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12-13346
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K-V Pharmaceutical Company
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12-13347
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Ther-Rx Corporation
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12-13348
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K-V Generic Pharmaceuticals, Inc.
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12-13349
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Zeratech Technologies USA, Inc.
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12-13350
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DrugTech Corporation
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12-13351
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K-V Solutions USA, Inc.
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12-13352
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FP1096, Inc.
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12-13353
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General Notes:
The financial statements and supplemental information contained herein are preliminary, unaudited, and may not comply in all material respects with accounting principles generally accepted in the United States ("GAAP"). In addition, the financial statements and supplemental information contained herein represent consolidated information.
The unaudited consolidated financial statements have been derived from the books and records of the Debtors and exclude activity for its non-debtor subsidiaries. This information has not been subject to certain procedures that would typically be applied to financial information in accordance with GAAP, and upon application of such procedures the financial information could be subject to changes, and these changes could be material.
The financial information contained herein is presented on a preliminary and unaudited basis and remains subject to future adjustment. The Debtors are reviewing their books and records and other information on an ongoing basis to determine whether the financial statements should be supplemented or otherwise amended. The Debtors reserve the right to file, at any time, such supplements or amendments to the financial statements that form a part of this MOR. The financial statements should not be considered an admission regarding any of the Debtors’ income, expenditures or general financial condition, but rather, a current compilation of the Debtors’ books and records. The Debtors do not make, and specifically disclaim, any representation or warranty as to the completeness or accuracy of the information set forth herein.
The unaudited consolidated financial statements contained herein have been prepared on a going concern basis and do not reflect or provide all of the possible consequences of the ongoing chapter 11 cases. Specifically, the unaudited consolidated financial statements do not present the amount which will ultimately be paid to settle liabilities and contingencies which may be required in these cases. As a result of the chapter 11 proceedings, the Debtors may take, or may be required to take, actions which may cause assets to be realized, or liabilities to be liquidated, for amounts other than those reflected in the unaudited consolidated financial statements.
Certain footnote disclosures normally included in unaudited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. The results of operations contained herein are not necessarily indicative of results which may be expected for any other period or for the full year and may not necessarily reflect the consolidated results of operations and financial position of the Debtors in the future.
- 3 -
MOR-1:
SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS 1
(Dollars in thousands)
Debtor
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Case Number
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Cash Receipts
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K-V Discovery Solutions, Inc
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12-13346 | 0 | ||||||
K-V Pharmaceutical Company
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12-13347 | $ | 469 | |||||
Ther-Rx Corporation
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12-13348 | 4,715 | ||||||
K-V Generic Pharmaceuticals, Inc
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12-13349 | 0 | ||||||
Zeratech Technologies USA, Inc
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12-13350 | 0 | ||||||
DrugTech Corporation
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12-13351 | 0 | ||||||
K-V Solutions USA Inc
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12-13352 | 0 | ||||||
FP1096, Inc
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12-13353 | 0 | ||||||
Total Cash Receipts
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$ | 5,184 |
Debtor
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Case Number
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Cash 2 Disbursements
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K-V Discovery Solutions, Inc
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12-13346 | 0 | ||||||
K-V Pharmaceutical Company
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12-13347 | $ | (6,649 | ) | ||||
Ther-Rx Corporation
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12-13348 | 0 | ||||||
K-V Generic Pharmaceuticals, Inc
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12-13349 | 0 | ||||||
Zeratech Technologies USA, Inc
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12-13350 | 0 | ||||||
DrugTech Corporation
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12-13351 | 0 | ||||||
K-V Solutions USA Inc
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12-13352 | 0 | ||||||
FP1096, Inc
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12-13353 | 0 | ||||||
Total Cash Disbursements
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$ | (6,649 | ) |
Notes
1 –
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Cash is received and disbursed by the Debtors as described in the Debtors’ motion to approve continued use of their cash management system (which motion was granted on an interim basis pursuant to an order entered by the Bankruptcy Court on August 7, 2012) and is consistent with the Debtors’ historical cash management practices. All amounts listed are the balances reported by the bank as of the end of the reporting period. Copies of bank statements will be provided upon reasonable request in writing to counsel for the Debtors.
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2 –
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Cash disbursements include $643 of outstanding checks.
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- 4 -
MOR-1 (CON’T):
BANK RECONCILIATIONS 1, 2, 3, 4, 5, 6
(Dollars in thousands)
Debtor
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Case Number
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Bank and Account Description
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Bank Account No. Ending In
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Bank Balance
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K-V Pharmaceutical Company
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12-13347 |
Fifth Third Money Market / Investment Account
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1225 | $ | 21,686 | ||||||||
K-V Pharmaceutical Company
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12-13347 |
Fifth Third / Nesher Escrow Account
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0383 | 7,512 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
Fifth Third Bank / Operating Account
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9158 | 7,068 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
Fifth Third / PDI Escrow Account
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18766 | 1,819 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
Bank of America / Payroll Account
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6170 | 961 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
Commerce Bank / Deposit Account
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2433 | 150 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
AMEX Centurion Bank / Certificate of Deposit
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8420 | 75 | |||||||||
K-V Pharmaceutical Company
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12-13347 |
Fifth Third Bank
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04795 | 2 | |||||||||
DrugTech Corporation
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12-13351 |
US Bank / DrugTech Custody Account
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3256 | 4 | |||||||||
DrugTech Corporation
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12-13351 |
Wells Fargo Bank/ DrugTech Operating Acct
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6823 | 1 | |||||||||
$ | 39,278 |
Notes
1 –
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The Debtors have not included copies of their bank statements or cash disbursement journals due to the voluminous nature of these reports. Copies of the Debtors’ bank statements and cash disbursement journals will be provided upon reasonable request in writing to counsel for the Debtors.
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2 –The Debtors reconcile their bank accounts on a monthly basis.
3 –The Debtors have excluded accounts with no balance as of the end of the reporting period.
4 –The Debtors’ bank balances exclude $643 of outstanding checks.
5 –
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The Debtors opened this bank account post-petition on August 28, 2012 in connection with a request for adequate protection by one of the Debtors’ utility service providers.
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6 –
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This account was inadvertently identified in the Debtors’ motion to approve continued use of their cash management system as ending in 4187.
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- 5 -
MOR-2:
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited; Dollars in thousands)
For the Month Ended August 31, 2012 1
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Net revenues
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$ | 4,190 | ||
Cost of sales
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260 | |||
Gross profit
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3,930 | |||
Research and development
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877 | |||
Selling and administrative
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7,140 | |||
Operating expenses
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8,017 | |||
Operating loss
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(4,087 | ) | ||
Interest, net and other
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219 | |||
Reorganization items, net
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2,217 | |||
Total other expense, net
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2,436 | |||
Loss from continuing operations before income taxes
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(6,523 | ) | ||
Income tax provision
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986 | |||
Net loss from continuing operations
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$ | (7,509 | ) |
Notes
1 -
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The Debtors prepare their income statement on an accrual basis. Attempting to pro-rate accruals for the three-day prepetition period (August 1, 2012 through August 3, 2012) would be burdensome and time-consuming, and such efforts would produce potentially inaccurate or misleading financial information. Accordingly, the Debtors’ income statement, as set forth in this MOR, reflects the results of the Debtors’ operations for the entire month of August.
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MOR-3:
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in thousands)
As of
August 31,
2012 |
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$ | 29,079 | ||
Restricted cash
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9,556 | |||
Receivables, net
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7,572 | |||
Inventories, net
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4,340 | |||
Other current assets
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4,334 | |||
Income taxes receivable
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460 | |||
Total Current Assets
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55,341 | |||
Property and equipment, less accumulated depreciation
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1,989 | |||
Intangible assets, net
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122,996 | |||
Other assets
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16,324 | |||
Total Assets
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$ | 196,650 | ||
LIABILITIES
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LIABILITIES NOT SUBJECT TO COMPROMISE:
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Current Liabilities:
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Accounts payable
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$ | 1,168 | ||
Accrued expenses
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17,465 | |||
Other current liabilities
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9,330 | |||
Total Current liabilities
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27,963 | |||
Total Liabilities not subject to compromise
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27,963 | |||
Total liabilities subject to compromise
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670,392 | |||
Total Liabilities
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698,355 | |||
SHAREHOLDERS' DEFICIT
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Preferred Stock
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0 | |||
Class A Common Stock
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643 | |||
Class B Common Stock
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112 | |||
Additional paid-in capital
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205,653 | |||
Accumulated deficit
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(650,704 | ) | ||
Less: Treasury stock
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(57,409 | ) | ||
Total Shareholders' Deficit
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(501,404 | ) | ||
Total Liabilities and Shareholders' Deficit
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$ | 196,650 |
- 7 -
MOR-4:
STATUS OF POST-PETITION TAXES 1, 2
(Dollars in thousands)
Federal
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Beginning Tax
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Amount Withheld and/or Accrued
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Amount Paid
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Ending Tax
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Withholding
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$ | 0 | $ | 453 | $ | (453 | ) | $ | 0 | |||||||
FICA-Employee
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0 | 121 | (121 | ) | 0 | |||||||||||
FICA-Employer
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0 | 161 | (161 | ) | 0 | |||||||||||
Total Federal Taxes
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$ | 0 | $ | 735 | $ | (735 | ) | $ | 0 | |||||||
State and Local
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Withholding
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$ | 0 | $ | 111 | $ | (111 | ) | $ | 0 | |||||||
Sales Tax
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9 | 0 | 0 | 9 | ||||||||||||
Unemployment
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0 | 0 | 0 | 0 | ||||||||||||
Real Property
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3 | 1 | 0 | 4 | ||||||||||||
Personal Property
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52 | 0 | 0 | 52 | ||||||||||||
Franchise Tax
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(20 | ) | 20 | (36 | ) | (36 | ) | |||||||||
Total State and Local
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$ | 44 | $ | 132 | $ | (147 | ) | $ | 29 | |||||||
Total Taxes
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$ | 44 | $ | 867 | $ | (882 | ) | $ | 29 |
Notes
1 -
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The Debtors have not annexed copies of tax returns filed with various taxing authorities during the current reporting period to this MOR, nor have they included the Debtors’ IRS Form 6123 with this MOR. Copies of such tax returns and IRS Form 6123 will be provided upon reasonable request in writing to counsel for the Debtors.
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2 -
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The Debtors believe they are paying all undisputed taxes and preparing and filing all tax returns when due or obtaining extensions where necessary.
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- 8 -
MOR-4 (CON’T):
SUMMARY OF UNPAID POST-PETITION DEBTS 1
(Dollars in thousands)
Description
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Amount
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0 - 30 days old
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$ | 1,168 | ||
31+ days old
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0 | |||
Total Vendor Accounts Payable Post-petition
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$ | 1,168 |
Notes
1 -
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The Debtors believe they are paying all undisputed post-petition obligations according to terms. Aged amounts represent certain items which have been paid subsequent to the end of the reporting period.
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MOR-5:
ACCOUNTS RECEIVABLE RECONCILIATION AND AGING
(Dollars in thousands)
Description
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Amount
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0 - 30 days old
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$ | 8,058 | ||
31 - 60 days old
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270 | |||
61 - 90 days old
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48 | |||
90+ days old
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888 | |||
Total Customer Accounts Receivable
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$ | 9,264 | ||
Customer Allowances
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(1,692 | ) | ||
Total Accounts Receivable
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$ | 7,572 |
- 10 -
MOR-6:
PAYMENTS TO INSIDERS AND PROFESSIONALS
(Dollars in thousands)
INSIDERS
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Name
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Category
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Amount
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Christmas, Patrick
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Salary
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$ | 17 | ||
Christmas, Patrick
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Travel
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2 | |||
Divis, Gregory
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Salary
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27 | |||
McHugh, Thomas
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Salary
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18 | |||
McHugh, Thomas
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Travel
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2 | |||
Total Insiders
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$ | 66 |
PROFESSIONALS
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Name
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Amount
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Houlihan Lokey Capital, Inc
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$ | 273 | ||
Total Professionals
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$ | 273 |
- 11 -
MOR-6 (CON’T):
POST-PETITION STATUS OF SECURED NOTES, LEASES PAYABLE
AND ADEQUATE PROTECTION PAYMENTS 1
(Dollars in thousands)
Name of Creditor
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Scheduled Monthly
Payment Due
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Amount Paid
During Month
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||||||
Building lease payable
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$ | 38 | $ | 38 | ||||
Utility deposit
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N/A | 2 | ||||||
Total Payments
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$ | 40 |
Notes
1 -
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The Debtors’ schedule of lease payments, as set forth in the MOR, only reflects payments made pursuant to the Debtors’ real property lease. Immaterial leases of personal property are not reflected in the financial statements that comprise part of this MOR.
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- 12 -
MOR-7:
DEBTOR QUESTIONNAIRE
Must be completed each month. If the answer to any of the questions is "Yes", provide a detailed explanation of each item. Attach additional sheets if necessary.
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Yes
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No
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1
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Have any assets been sold or transferred outside the normal course of business this reporting period?
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X
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2
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Have any funds been disbursed from any account other than a debtor in possession account this reporting period?
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X
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3
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Is the Debtor delinquent in the timely filing of any post-petition tax returns?
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X
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4
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Are workers compensation, general liability or other necessary insurance coverages expired or cancelled, or has the debtor received notice of expiration or cancellation of such policies?
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X
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5
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Is the Debtor delinquent in paying any insurance premium payment?
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X
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6
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Have any payments been made on pre-petition liabilities this reporting period?
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X
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7
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Are any post-petition receivables (accounts, notes or loans) due from related parties?
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X
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8
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Are any post-petition payroll taxes past due?
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X
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9
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Are any post-petition State or Federal income taxes past due?
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X
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10
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Are any post-petition real estate taxes past due?
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X
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11
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Are any other post-petition taxes past due?
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X
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12
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Have any pre-petition taxes been paid during this reporting period?
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X
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13
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Are any amounts owed to post-petition creditors delinquent?
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X
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14
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Are any wages payments past due?
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X
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15
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Have any post-petition loans been received by the Debtor from any party?
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X
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16
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Is the Debtor delinquent in paying any US Trustee fees?
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X
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17
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Is the Debtor delinquent with any court ordered payments to attorneys or other professionals?
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X
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18
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Have the owners or shareholders received any compensation outside of the normal course of business?
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X
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Explanations
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6
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Pursuant to various orders entered by the Bankruptcy Court, the Debtors were authorized to pay certain pre-petition employee salary and benefit obligations, as well as certain pre-petition vendor, warehousemen and common carrier obligations. The Bankruptcy Court also approved the Debtors’ motion to honor certain prepetition obligations to their customers.
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12
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Pursuant to an order entered by the Bankruptcy Court, the Debtors were authorized to pay certain pre-petition taxes and other fees.
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13
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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. Any aged amounts represent items subject to valid disputes and certain items which have been paid subsequent to the end of this reporting period.
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- 13 -
MAKENA® PERFORMANCE METRICS
Makena® (hydroxyprogesterone caproate injection) is the Debtors’ single-most valuable product. The information below addresses certain key performance metrics related to Makena®. The amounts shown are based on estimates and are subject to change. Gross revenues are preliminary and unaudited, and are not prepared in accordance with GAAP.
Three Months Ended
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Gross Revenues ($ in thousands) (1)
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Total Prescriptions (2)
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Vials Shipped to Customers (3)
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|||||||||
9/30/2011
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$ | 1,318 | 1,255 | 382 | ||||||||
12/31/2011
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$ | 1,670 | 1,687 | 484 | ||||||||
3/31/2012
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$ | 6,396 | 2,240 | 1,854 | ||||||||
6/30/2012
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$ | 13,393 | 2,577 | 3,882 | ||||||||
$ | 13,938 | 2,939 | 4,041 |
Notes:
(1) Amounts shown are estimated based on the number of vials shipped and list price/vial.
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(2) Represents total prescriptions reported to the Debtors and does not include cancellations.
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(3) Represents paid vials shipped to the Debtors' customers, which include specialty pharmacies and distributors.
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(4) Data for the months of June, July, and August 2012 is used in the absence of complete data for three months ending September 30, 2012.
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- 14 -