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Item 7.01
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Regulation FD Disclosure.
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As previously disclosed, on February 12,
2020, Akorn, Inc. (the “Company”), certain of its subsidiaries and certain of its lenders entered into a Second Amendment
to Standstill Agreement and Third Amendment to Credit Agreement (the “Amended Standstill Agreement”) to the Company’s
Loan Agreement, dated as of April 17, 2014 (as amended, supplemented or otherwise modified, the “Term Loan Agreement”),
with the lenders thereunder and Wilmington Savings Fund Society, FSB, as administrative agent. Among other things, the Amended
Standstill Agreement provides that the Company will market and conduct a sale process for substantially all of its assets in accordance
with certain milestones (the “Sale Process”). As of March 28, 2020, there were no bids in the Sale Process sufficient
to pay all obligations under the Term Loan Agreement and an immediate Event of Default under the Term Loan Agreement occurred.
As a result, as of April 1, 2020, the alternative milestones for the Sale Process set forth in the Amended Standstill Agreement
apply, which provide that, among other things, the Company shall commence cases under Chapter 11 of title 11 of the U.S. Code on
or before May 1, 2020.
In connection with the Sale Process, the
Company has been engaged in discussions with certain lenders and has entered into confidentiality agreements (the “NDAs”)
with such lenders (the “NDA Parties”). Pursuant to the terms of the NDAs, the Company agreed to publicly disclose certain
information regarding the Company provided to the NDA Parties pursuant to the NDAs (the “Cleansing Materials”) upon
the occurrence of certain events.
The Cleansing Materials contain certain
preliminary financial results as of and for the three months ended March 31, 2020 and information related to potential effects
of the COVID-19 pandemic, the Company’s product pipeline, manufacturing, regulatory compliance
and research and development, as well as certain projections and forecasts including the cash flow projections. The
Company has not yet finalized its results as of and for the period ended March 31, 2020 and its consolidated financial statements
for the period are not currently available. The Company’s actual results remain subject to their completion, which includes
review by management and the Company’s board of directors, including the audit committee. While carrying out such procedures,
the Company may identify items that require it to make adjustments to the preliminary estimates of its results set forth therein.
The Cleansing Materials are based solely on information available to the Company as of the date of their preparation and,
therefore, the preliminary results, projections and forecasts included therein may differ from actual results and such differences
may be material. Especially, given the uncertainty of the evolving COVID-19 pandemic, the
Company reserves the right to make adjustments to the preliminary results, projections and forecasts in the future, as additional
operational and financial data is received. Any projections or forecasts included in the Cleansing Materials were not
prepared with a view toward public disclosure or compliance with the published guidelines of the U.S. Securities and Exchange Commission
(“SEC”). The Company’s independent accountants have not examined, compiled or otherwise applied procedures to
the projections or forecasts and, accordingly, do not express an opinion or any other form of assurance with respect to the projections
or forecasts. The inclusion of the projections or forecasts in the Cleansing Materials should not be regarded as an indication
that the Company or its representatives consider the projections or forecasts to be a reliable prediction of future events, and
the projections and forecasts should not be relied upon as such. Therefore, a reader should not place undue reliance on these projections
or forecasts.
Cautionary Note
Regarding Forward-Looking Statements
This report includes statements that
may constitute “forward-looking statements,” including expectations regarding the Company’s business,
product development, product launches, remediation, data integrity, long-term business plan, the path and milestones for
executing a sale of the Company’s business, through the filing of Chapter 11 cases under the U.S. Bankruptcy Code, the
Company’s continued engagement in discussions with certain of its lenders regarding the process for such potential sale
of the Company’s business, other statements regarding the Company’s plans and strategy and the potential impact
of the spread of coronavirus (also known as COVID-19). When used in this 8-K, the words “will,”
“expect,” “continue,” “believe,” “seek,” “anticipate,”
“estimate,” “intend,” “could,” “would,” “strives” and similar
expressions are generally intended to identify forward-looking statements. These statements are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. A number of important factors could cause actual results of the Company and its subsidiaries to differ
materially from those indicated by such forward-looking statements. These factors include, but are not limited to: (i) the
effect of the Delaware Court of Chancery’s October 1, 2018 decision against the Company and the Delaware Supreme
Court’s December 7, 2018 order affirming the Chancery Court’s decision on the Company’s ability to retain
and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does
business, or its operating results and business generally, (ii) the risk that ongoing or future litigation against the
defendants or related to the Chancery Court’s decision and Delaware Supreme Court’s affirmation may result in
significant costs of defense, indemnification and/or liability, (iii) the outcome of the investigation conducted by the
Company with the assistance of outside consultants, into alleged breaches of FDA data integrity requirements relating to
product development at the Company and any actions taken by the Company, third parties or the FDA as a result of such
investigations, (iv) the difficulty of predicting the timing or outcome of product development efforts, including FDA and
other regulatory agency approvals and actions, if any, (v) the timing and success of product launches, (vi) difficulties or
delays in manufacturing, (vii) the Company’s increased indebtedness and compliance with certain covenants and other
obligations under the Amended Standstill Agreement, which create material uncertainties and risks to its growth and business
outlook, (viii) the Company’s obligation under the Amended Standstill Agreement to pay certain fees and expenses and
increased interest margin, (ix) the Company’s exploration of strategic alternatives, including the alternatives of
seeking to restructure its indebtedness and/or implement a strategic transaction (including a sale of its assets) with the
protections of a filing under Chapter 11 of the U.S. Bankruptcy Code, (x) the risk that the insurance proceeds to be
delivered pursuant to the Settlement Agreement are not available at the appropriate time, (xi) potential adverse impacts on
the Company’s business and any cases commenced under Chapter 11 due to the effects of COVID-19; and (xii) such other
risks and uncertainties outlined in the risk factors detailed in Part I, Item 1A, “Risk Factors,” of the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (as filed with the SEC on February 26,
2020) and other risk factors identified from time to time in the Company’s filings with the SEC. Readers should
carefully review these risk factors, and should not place undue reliance on the Company’s forward-looking statements.
These forward-looking statements are based on information, plans and estimates at the date of this report. The Company
undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors,
new information, future events or other changes.
The descriptions in this Form 8-K of the
Cleansing Materials do not purport to be complete and are qualified in their entirety by reference to the complete presentation
of the Cleansing Material attached as Exhibit 99.1 hereto.
The information being furnished in this
Item 7.01 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section.