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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 001-32360
 AKORN, INC.
  LOUISIANA
    
    72-0717400(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 2500 Millbrook Drive, Buffalo Grove, Illinois 60089
 Registrants telephone number, including area code: (847) 279-6100
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, No Par Value
    
    The NASDAQ Stock Market LLC
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 o þ
 o þ
 þ o
 o
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer: o
    
    Smaller reporting company: o(Do not check if a smaller reporting company)
 o þ




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Forward-Looking Statements and Factors Affecting Future Results
  
    
    Our ability to comply with all of the requirements of the Food and Drug Administration,
including current Good Manufacturing Practices regulations;
    
    Our ability to obtain regulatory approvals for products manufactured in our new
lyophilization facility;
    
    Our ability to avoid defaults under debt covenants;
    
    Our ability to generate cash from operations sufficient to meet our working capital
requirements;
    
    The effects of federal, state and other governmental regulation on our business;
    
    Our success in developing, manufacturing, acquiring and marketing new products;
    
    The success of our strategic partnerships for the development and marketing of new
products;
    
    Our ability to bring new products to market and the effects of sales of such products on
our financial results;
    
    The effects of competition from generic pharmaceuticals and from other pharmaceutical
companies;
    
    Availability of raw materials needed to produce our products; and
    
    Other factors referred to in this Form 10-K and our other Securities and Exchange
Commission filings.
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FORM 10-K TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    15Item 2.
    
    Properties
    
    
    15Item 3.
    
    Legal Proceedings
    
    
    16Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    17Item 6.
    
    Selected Financial Data
    
    
    20Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 8.
    
    Financial Statements and Supplementary Data
    
    
    32Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    57Item 9A.
    
    Controls and Procedures
    
    
    57Item 9B.
    
    Other Information
    
    
    58PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    59Item 11.
    
    Executive Compensation
    
    
    59Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    59Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    59Item 14.
    
    Principal Accounting Fees and Services
    
    
    59PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    60Amendment to Credit AgreementConsent of Independent Registered Public AccountantCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of Chief Financial Officer
  3




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PART I
 
 Item 1. Business
    Ophthalmic Segment.
 Hospital Drugs & Injectables Segment.
 Biologics & Vaccines Segment.
 Contract Services Segment.
 Manufacturing.
 Sales and Marketing.
  4




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Research and Development. ®
       5




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Patents, Trademarks and Proprietary Rights.
  Employee Relations.
 Competition.
     6




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Suppliers and Customers.
  
    
    AmerisourceBergen Corporation (AmerisourceBergen)
    
    Cardinal Health, Inc. (Cardinal); and
    
    McKesson Drug Company (McKesson).
  2007
    
    2006Gross
    
    Net
    
    Gross Accounts
    
    Gross
    
    Net
    
    Gross AccountsSales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    ReceivableAmerisourceBergen
    
    
    22
    %
    
    
    17
    %
    
    
    36
    %
    
    
    13
    %
    
    
    9
    %
    
    
    12
    %Cardinal
    
    
    25
    %
    
    
    21
    %
    
    
    25
    %
    
    
    19
    %
    
    
    13
    %
    
    
    24
    %McKesson
    
    
    20
    %
    
    
    15
    %
    
    
    8
    %
    
    
    18
    %
    
    
    11
    %
    
    
    17
    %
  Backorders.
 7




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Government Regulation.
  FDA Warning Letter.
    Product Recalls.
 DEA Regulation.
 Environment
 Foreign Sales
 Seasonality
 8




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Government Contracts
 Available Information http://www.sec.gov www.akorn.com
 
 Item 1A. Risk Factors.
 We have experienced recent operating losses, working capital deficiencies and negative cash flows
from operations, and these losses and deficiencies may continue in the future.
  We have invested significant resources in the development of lyophilization manufacturing
capability, and we may not realize the benefit of these efforts and expenditures .
   We depend on a small number of distributors, the loss of any of which could have a material adverse
effect.
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Certain of our directors are subject to conflicts of interest.
  We may require additional capital to grow our business and such funds may not be available to us.
  Our growth depends on our ability to timely develop additional pharmaceutical products and
manufacturing capabilities.
  We have entered into several strategic business alliances which may not result in marketable
products.
  Our growth and profitability is dependent on our ability to successfully market and distribute new
products, including vaccine products, through various distribution channels.
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Our success depends on the development of generic and off-patent pharmaceutical products which are
particularly susceptible to competition, substitution policies and reimbursement policies.
   We can be subject to legal proceedings against us, which may prove costly and time-consuming even
if meritless.
  Our revenues depend on sale of products manufactured by third parties, which we cannot control.
  Dependence on key executive officers.
  We must continue to attract and retain key personnel to be able to compete successfully.
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We are subject to extensive government regulations that increase our costs and could subject us to
fines, prevent us from selling our products or prevent us from operating our facilities.
  FDA regulations.
 We must obtain approval from the FDA for each pharmaceutical product that we market which
requires a regulatory submission.
 We and our third-party manufacturers are subject to periodic inspection by the FDA to assure
regulatory compliance regarding the manufacturing, distribution, and promotion of pharmaceutical
products.
  If the FDA changes its regulatory position, it could force us to delay or suspend our
manufacturing, distribution or sales of certain products.
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We are subject to extensive DEA regulation, which could result in our being fined or otherwise
penalized.
 We may implement product recalls and could be exposed to significant product liability claims; we
may have to pay significant amounts to those harmed and may suffer from adverse publicity as a
result.
    The FDA may authorize sales of some prescription pharmaceuticals on a non-prescription basis, which
would reduce the profitability of our prescription products.
  Our industry is very competitive. Additionally, changes in technology could render our products
obsolete.
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Many of the raw materials and components used in our products come from a single source.
  Our patents and proprietary rights may not adequately protect our products and processes.
  Concentrated ownership of our common stock and our registration of shares for public sale creates a
risk of sudden changes in our share price.
  Exercise of warrants and options may have a substantial dilutive effect on our common stock.
  We may issue preferred stock and the terms of such preferred stock may reduce the value of our
common stock.
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We experience significant quarterly fluctuation of our results of operations, which may increase
the volatility of our stock price.
  Penny Stock rules may make buying or selling our common stock difficult.
  The requirements of being a public company may strain our resources and distract management.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
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Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  16




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
  High
    
    LowYear Ending December 31, 20081st Quarter (through March 7, 2008)
    
    $
    8.19
    
    
    $
    5.26Year Ended December 31, 20071st Quarter
    
    $
    7.00
    
    
    $
    5.002nd Quarter
    
    
    7.73
    
    
    
    6.103rd Quarter
    
    
    8.00
    
    
    
    6.424th Quarter
    
    
    7.95
    
    
    
    5.82Year Ended December 31, 20061st Quarter
    
    $
    5.55
    
    
    $
    3.902nd Quarter
    
    
    5.37
    
    
    
    3.613rd Quarter
    
    
    4.25
    
    
    
    3.014th Quarter
    
    
    6.61
    
    
    
    3.40
     17




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EQUITY COMPENSATION PLANS
 Equity Compensation Plans Approved by Stockholders
  18




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Number of securitiesremaining availableNumber of
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    under equityissued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected in thePlan Category
    
    and rights
    
    and rights
    
    first column)Equity Compensation plans approved by security holders:1988 Plan
    
    
    13,725
    
    
    $
    0.90
    
    
    
    2003 Plan
    
    
    1,579,000
    
    
    $
    2.55
    
    
    
    2003 Amended Plan
    
    
    3,126,374
    
    
    $
    5.79
    
    
    
    1,335,554Total
    
    
    4,894,099
    
    
    $
    4.69
    
    
    
    1,335,554
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Item 6. Selected Financial Data
  2007
    
    2006
    
    2005
    
    2004
    
    2003OPERATIONS DATA (000s)Revenues
    
    $
    52,895
    
    
    $
    71,250
    
    
    $
    44,484
    
    
    $
    50,708
    
    
    $
    45,491Gross profit
    
    
    11,400
    
    
    
    26,880
    
    
    
    14,944
    
    
    
    18,202
    
    
    
    12,148Operating loss (1)
    
    
    (19,815
    )
    
    
    (4,905
    )
    
    
    (7,479
    )
    
    
    (368
    )
    
    
    (6,276
    )Interest and other income (expense) (2)
    
    
    650
    
    
    
    (1,055
    )
    
    
    (1,113
    )
    
    
    (2,650
    )
    
    
    (6,220
    )Pretax loss
    
    
    (19,165
    )
    
    
    (5,960
    )
    
    
    (8,592
    )
    
    
    (3,018
    )
    
    
    (12,496
    )Income tax provision (benefit)
    
    
    3
    
    
    
    3
    
    
    
    17
    
    
    
    8
    
    
    
    (171
    )Net loss
    
    
    (19,168
    )
    
    
    (5,963
    )
    
    
    (8,609
    )
    
    
    (3,026
    )
    
    
    (12,325
    )Preferred stock dividends and adjustments (3)
    
    
    
    
    
    
    (843
    )
    
    
    (4,082
    )
    
    
    (34,436
    )
    
    
    Net loss available to common stockholders
    
    $
    (19,168
    )
    
    $
    (6,806
    )
    
    $
    (12,691
    )
    
    $
    (37,462
    )
    
    $
    (12,325
    )Weighted average shares outstanding:Basic
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095
    
    
    
    20,817
    
    
    
    19,745Diluted
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095
    
    
    
    20,817
    
    
    
    19,745PER SHAREEquity
    
    $
    0.74
    
    
    $
    0.95
    
    
    $
    1.57
    
    
    $
    2.27
    
    
    $
    0.58Net loss:Basic
    
    
    (0.22
    )
    
    
    (0.09
    )
    
    
    (0.49
    )
    
    
    (1.80
    )
    
    
    (0.62
    )Diluted
    
    
    (0.22
    )
    
    
    (0.09
    )
    
    
    (0.49
    )
    
    
    (1.80
    )
    
    
    (0.62
    )Price: High
    
    
    8.00
    
    
    
    6.61
    
    
    
    4.91
    
    
    
    4.30
    
    
    
    2.35Low
    
    
    5.00
    
    
    
    3.01
    
    
    
    2.17
    
    
    
    2.00
    
    
    
    0.45BALANCE SHEET (000s)Current assets
    
    $
    45,722
    
    
    $
    39,654
    
    
    $
    15,694
    
    
    $
    22,393
    
    
    $
    10,595Net property, plant & equipment
    
    
    32,262
    
    
    
    33,486
    
    
    
    31,071
    
    
    
    31,893
    
    
    
    33,907Total assets
    
    
    86,966
    
    
    
    82,083
    
    
    
    57,095
    
    
    
    66,922
    
    
    
    59,415Current liabilities, including debt in default (4)
    
    
    21,000
    
    
    
    10,253
    
    
    
    15,460
    
    
    
    11,160
    
    
    
    11,959Long-term obligations, less current installments (5)
    
    
    1,308
    
    
    
    1,516
    
    
    
    602
    
    
    
    8,436
    
    
    
    36,065Shareholders equity
    
    
    64,658
    
    
    
    70,314
    
    
    
    41,033
    
    
    
    47,326
    
    
    
    11,391CASH FLOW DATA (000s)From operating activities
    
    $
    (24,891
    )
    
    $
    2,509
    
    
    $
    (148
    )
    
    $
    (3,461
    )
    
    $
    (1,932
    )From investing activities
    
    
    (2,184
    )
    
    
    (4,377
    )
    
    
    (1,857
    )
    
    
    (838
    )
    
    
    (1,743
    )From financing activities
    
    
    13,205
    
    
    
    22,895
    
    
    
    (1,314
    )
    
    
    8,191
    
    
    
    3,529Change in cash and cash equivalents
    
    
    (13,870
    )
    
    
    21,027
    
    
    
    (3,319
    )
    
    
    3,892
    
    
    
    (146
    )
 
 (1)
    
    Operating loss includes (in thousands): long-lived asset impairment charges of $2,037 in
2004.(2)
    
    Interest and other expense include the following (in thousands): (a) loss on exchange
transaction of $3,102 in 2003 and (b) dividends and discount accretion related to our Series A
Preferred Stock of $1,064 in 2004 and $589 in 2003. After the July 2004 shareholder approval relating to our Series A Preferred Stock,
such dividends and accretion did not impact net income (loss) but continued to impact earnings
(loss) per share until the Series A Preferred Stock was converted to shares of our common
stock on January 13, 2006.(3)
    
    Pursuant to the July 2004 shareholder approval that resulted in our Series A Preferred Stock
being recharacterized as equity rather than debt, dividends and adjustments related to our
preferred stock, while not impacting net loss, do result in increased losses available to
common stockholders when computing basic and diluted loss per share. A significant portion of
these adjustments for 2004 relate to accreting the carrying value of the preferred stock up to
its stated value.(4)
    
    Current liabilities include (in thousands) $3,250 of debt in default as of December 31, 2004.
This debt was retired in 2005. See Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations  Financial Conditions and Liquidity. 20




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(5)
    
    Long-term obligations include (in thousands) $21,132 of Series A Preferred Stock as of
December 31, 2003. Pursuant to the July 2004 shareholder approval relating to our Series A
Preferred Stock, these securities were reclassified into shareholders equity.
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 RESULTS OF OPERATIONS
     Years EndedDecember 31,2007
    
    2006
    
    2005RevenuesOphthalmic
    
    
    35
    %
    
    
    27
    %
    
    
    51
    %Hospital Drugs & Injectables
    
    
    37
    
    
    
    60
    
    
    
    31Biologics & Vaccines
    
    
    14
    
    
    
    
    
    
    
    Contract Services
    
    
    14
    
    
    
    13
    
    
    
    18Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100Gross profitOphthalmic
    
    
    7
    %
    
    
    9
    %
    
    
    18
    %Hospital Drugs & Injectables
    
    
    10
    
    
    
    26
    
    
    
    13Biologics & Vaccines
    
    
    1
    
    
    
    
    
    
    
    Contract Services
    
    
    4
    
    
    
    3
    
    
    
    3Total Gross Profit
    
    
    22
    
    
    
    38
    
    
    
    34Selling, general and administrative expenses
    
    
    41
    
    
    
    26
    
    
    
    37Amortization and write-downs of intangibles
    
    
    3
    
    
    
    2
    
    
    
    4Research and development expenses
    
    
    15
    
    
    
    17
    
    
    
    10Operating loss
    
    
    (37
    )
    
    
    (7
    )
    
    
    (17
    )Net loss
    
    
    (36
    )%
    
    
    (8
    )%
    
    
    (19
    )%
 COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2006
   21




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COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 2006 AND 2005
     22




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FINANCIAL CONDITION AND LIQUIDITY
 Overview
      Facility Expansion
   23




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Credit Facility
      Subordinated Debt
  24




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Other Indebtedness
   Preferred Stock and Warrants
 Series A Preferred Stock and Warrants
   Series B Preferred Stock and Warrants
   25




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consecutive trading days immediately preceding such date exceeds $5.00 per share. The closing
price per share of the common stock as reported on the American Stock Exchange exceeded $5.00 for
20 consecutive trading days as of the close of the market on December 13, 2006. Consequently, all
66,000 outstanding shares of Series B Preferred Stock immediately and automatically converted into
an aggregate of 2,804,800 shares of common stock on December 14, 2006. As of December 31, 2006,
no shares of Series B Preferred Stock remain outstanding. We
received no consideration in connection with the automatic conversion
of Series B Preferred Stock.
 Other Warrants
 .
  26




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CONTRACTUAL OBLIGATIONS
   Payment Due  by Period
    
    
    More thanDescription
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsCurrent and Long Term-Debt
    
    $
    208
    
    
    $
    208
    
    
    $
    
    
    
    $
    
    
    
    $
    Credit
Facility 3
    
    
    4,898
    
    
    
    4,898
    
    
    
    
    
    
    
    
    
    
    
    Operating Leases
    
    
    14,622
    
    
    
    1,528
    
    
    
    3,404
    
    
    
    3,006
    
    
    
    6,684Inventory
Purchase Commitments 1
    
    
    145,944
    
    
    
    33,881
    
    
    
    108,063
    
    
    
    2,000
    
    
    
    2,000Strategic
Partners  Contingent Payments 2
    
    
    7,712
    
    
    
    1,698
    
    
    
    3,774
    
    
    
    1,240
    
    
    
    1,000Interest Payments on Debt
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    173,388
    
    
    $
    42,217
    
    
    $
    115,241
    
    
    $
    6,246
    
    
    $
    9,684
 
 1
    
    Estimated purchase commitments under multi-year inventory
supply agreements.2
    
    Note Strategic Partner Payments are
estimates which assume that various contingencies and market opportunities occur in 2008 and
beyond.3
    
    Balance is amount outstanding under our Revolving Credit
Facility that expires January 1, 2009 plus interest payments based on
the amount and weighted average interest
rate of debt outstanding as of December 31, 2007. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
  Net Income (Loss)Gross
    
    
    
    
    
    Per Share
    
    Per ShareRevenues
    
    Profit
    
    Amount
    
    Basic
    
    DilutedYear Ended December 31, 2007:1st Quarter
    
    $
    11,735
    
    
    $
    2,489
    
    
    $
    (4,843
    )
    
    $
    (0.06
    )
    
    $
    (0.06
    )2nd Quarter
    
    
    11,638
    
    
    
    2,886
    
    
    
    (4,634
    )
    
    
    (0.05
    )
    
    
    (0.05
    )3rd Quarter
    
    
    15,814
    
    
    
    2,968
    
    
    
    (4,727
    )
    
    
    (0.05
    )
    
    
    (0.05
    )4th Quarter
    
    
    13,708
    
    
    
    3,057
    
    
    
    (4,964
    )
    
    
    (0.06
    )
    
    
    (0.06
    )Year Ended December 31, 2006:1st Quarter
    
    $
    29,730
    
    
    $
    11,733
    
    
    $
    3,126
    
    
    $
    0.05
    
    
    $
    0.042nd Quarter
    
    
    12,475
    
    
    
    4,955
    
    
    
    (1,963
    )
    
    
    (0.03
    )
    
    
    (0.03
    )3rd Quarter
    
    
    14,490
    
    
    
    5,951
    
    
    
    (1,067
    )
    
    
    (0.02
    )
    
    
    (0.02
    )4th Quarter
    
    
    14,555
    
    
    
    4,241
    
    
    
    (6,059
    )
    
    
    (0.07
    )
    
    
    (0.07
    )
 27




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CRITICAL ACCOUNTING POLICIES
 Revenue Recognition
  Allowance for Chargebacks and Rebates
     Allowance for Product Returns
  28




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Allowance for Doubtful Accounts
  
    
    Identified the relevant factors that might affect the accounting estimate for allowance
for doubtful accounts, including: (a) historical experience with collections and write-offs;
(b) credit quality of customers; (c) the interaction of credits being taken for discounts,
rebates, allowances and other adjustments; (d) balances of outstanding receivables, and
partially paid receivables; and (e) economic and other exogenous factors that might affect
collectibility (e.g., bankruptcies of customers, channel factors, etc.).
    
    Accumulated data on which to base the estimate for allowance for doubtful accounts,
including: (a) collections and write-offs data; (b) information regarding current credit
quality of customers; and (c) information regarding exogenous factors, particularly in
respect of major customers.
    
    Developed assumptions reflecting our judgments as to the most likely circumstances and
outcomes, regarding, among other matters: (a) collectibility of outstanding balances
relating to partial payments; (b) the ability to collect items in dispute (or subject to
reconciliation) with customers; and (c) economic and other exogenous factors that might
affect collectibility of outstanding balances  based upon information available at the
time.
  Allowance for Slow-Moving Inventory
  29




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##### Table of Contents



Warranty Liability
  Income Taxes
  Intangibles
  Stock-Based Compensation
  RECENT ACCOUNTING PRONOUNCEMENTS
   Fair Value
Measurements.
 30




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##### Table of Contents



31




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
     
 Item 8. Financial Statements and Supplementary Data
   Report of Independent Registered Public Accounting Firm
 Consolidated Balance Sheets as of December 31, 2007 and 2006
 Consolidated
Statements of Operations for the years ended December 31, 2007, 2006, and 2005
 Consolidated
Statements of Shareholders Equity for the years ended December 31, 2007, 2006, and 2005
 Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006, and 2005
 Notes to Consolidated Financial Statements
 32




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     Internal Control  Integrated Framework
  
 33




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##### Table of Contents



Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting
 
        
 34




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##### Table of Contents



AKORN, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in Thousands, Except Share Data)
 December 31,2007
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    7,948
    
    
    $
    21,818Restricted Cash  Revolving Credit Agreement
    
    
    1,250
    
    
    
    Trade accounts receivable (less allowance
for doubtful accounts of $5 and $3 at
December 31, 2007 and 2006, respectively)
    
    
    4,112
    
    
    
    4,781Inventories, net
    
    
    31,095
    
    
    
    11,734Prepaid expenses and other current assets
    
    
    1,317
    
    
    
    1,321TOTAL CURRENT ASSETS
    
    
    45,722
    
    
    
    39,654PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    32,262
    
    
    
    33,486OTHER ASSETSIntangibles, net
    
    
    7,721
    
    
    
    8,825Other
    
    
    1,261
    
    
    
    118TOTAL OTHER ASSETS
    
    
    8,982
    
    
    
    8,943TOTAL ASSETS
    
    $
    86,966
    
    
    $
    82,083LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESRevolving line of credit
    
    $
    4,521
    
    
    $
    Mortgage Payable
    
    
    208
    
    
    
    394Trade accounts payable
    
    
    14,070
    
    
    
    4,719Accrued compensation
    
    
    895
    
    
    
    1,849Accrued royalty
    
    
    12
    
    
    
    1,517Accrued expenses and other liabilities
    
    
    1,294
    
    
    
    1,774TOTAL CURRENT LIABILITIES
    
    
    21,000
    
    
    
    10,253Mortgage
payable, less current installments
    
    
    
    
    
    
    208Warranty liability
    
    
    1,308
    
    
    
    1,308TOTAL LIABILITIES
    
    
    22,308
    
    
    
    11,769COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYCommon stock, no par value  150,000,000
shares authorized; 88,900,588, and
85,990,964 shares issued and outstanding at
December 31, 2007 and 2006, respectively
    
    
    165,829
    
    
    
    150,250Warrants to acquire common stock
    
    
    2,795
    
    
    
    4,862Accumulated deficit
    
    
    (103,966
    )
    
    
    (84,798
    )TOTAL SHAREHOLDERS EQUITY
    
    
    64,658
    
    
    
    70,314TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    86,966
    
    
    $
    82,083
  35




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##### Table of Contents



AKORN, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In Thousands, Except Per Share Data)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenues
    
    $
    52,895
    
    
    $
    71,250
    
    
    $
    44,484Cost of sales
    
    
    41,495
    
    
    
    44,370
    
    
    
    29,540GROSS PROFIT
    
    
    11,400
    
    
    
    26,880
    
    
    
    14,944Selling, general and administrative expenses
    
    
    21,861
    
    
    
    18,603
    
    
    
    16,405Amortization and write down of intangibles
    
    
    1,504
    
    
    
    1,385
    
    
    
    1,508Research and development expenses
    
    
    7,850
    
    
    
    11,797
    
    
    
    4,510OPERATING EXPENSES
    
    
    31,215
    
    
    
    31,785
    
    
    
    22,423OPERATING LOSS
    
    
    (19,815
    )
    
    
    (4,905
    )
    
    
    (7,479
    )Interest income (expense)
    
    
    649
    
    
    
    (604
    )
    
    
    (2,325
    )Debt Retirement Gain/(Expense)
    
    
    
    
    
    
    (391
    )
    
    
    1,212Other income/(expense)
    
    
    1
    
    
    
    (60
    )
    
    
    LOSS BEFORE INCOME TAXES
    
    
    (19,165
    )
    
    
    (5,960
    )
    
    
    (8,592
    )Income tax provision
    
    
    3
    
    
    
    3
    
    
    
    17NET LOSS
    
    
    (19,168
    )
    
    
    (5,963
    )
    
    
    (8,609
    )Preferred stock dividends and adjustments
    
    
    
    
    
    
    (843
    )
    
    
    (4,082
    )NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
    
    $
    (19,168
    )
    
    $
    (6,806
    )
    
    $
    (12,691
    )NET LOSS PER SHARE:BASIC
    
    $
    (0.22
    )
    
    $
    (0.09
    )
    
    $
    (0.49
    )DILUTED
    
    $
    (0.22
    )
    
    $
    (0.09
    )
    
    $
    (0.49
    )SHARES USED IN COMPUTING NET LOSS PER SHARE:BASIC
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095DILUTED
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095
  36




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##### Table of Contents



AKORN, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(In Thousands)
 Warrants
    
    RetainedCommon Stock
    
    Series A
    
    Series B
    
    to acquire
    
    EarningsAdditional Paid-In-Capital
    
    Preferred
    
    Preferred
    
    Common
    
    (AccumulatedShares
    
    Amount
    
    Stock
    
    Stock
    
    Stock
    
    Deficit)
    
    TotalBALANCES AT DECEMBER 31,
2004
    
    
    25,133
    
    
    $
    59,571
    
    
    $
    25,787
    
    
    $
    13,109
    
    
    $
    14,160
    
    
    $
    (65,301
    )
    
    $
    47,326Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,609
    )
    
    
    (8,609
    )Preferred stock
dividends earned
    
    
    
    
    
    
    
    
    
    
    1,563
    
    
    
    783
    
    
    
    
    
    
    
    (2,346
    )
    
    
    Intrinsic value of
beneficial conversion
features in convertible
preferred stock
    
    
    
    
    
    
    1,736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,736
    )
    
    
    Conversion of preferred
stock into common stock
    
    
    1,409
    
    
    
    3,252
    
    
    
    (118
    )
    
    
    (3,134
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of warrants
into common stock
    
    
    350
    
    
    
    652
    
    
    
    
    
    
    
    
    
    
    
    (464
    )
    
    
    
    
    
    
    188Intrinsic value of
beneficial conversion
features in convertible
interest
    
    
    
    
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353Exercise of stock options
    
    
    693
    
    
    
    1,287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,287Employee stock purchase
plan issuances
    
    
    34
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Amortization of Deferred
Compensation related to
Restricted Stock Awards
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    407BALANCES AT DECEMBER 31,
2005
    
    
    27,619
    
    
    $
    67,339
    
    
    $
    27,232
    
    
    $
    10,758
    
    
    $
    13,696
    
    
    $
    (77,992
    )
    
    $
    41,033Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,963
    )
    
    
    (5,963
    )Preferred stock
dividends earned
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    536
    
    
    
    
    
    
    
    (591
    )
    
    
    Intrinsic value of
beneficial conversion
features in convertible
preferred stock
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    Conversion of preferred
stock into common stock
    
    
    41,275
    
    
    
    38,581
    
    
    
    (27,287
    )
    
    
    (11,294
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of warrants
into common stock
    
    
    6,957
    
    
    
    13,503
    
    
    
    
    
    
    
    
    
    
    
    (10,655
    )
    
    
    
    
    
    
    2,848Conversion of
convertible notes into
common stock
    
    
    3,540
    
    
    
    7,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,298Net Proceeds from
issuance of common stock
and warrants
    
    
    5,312
    
    
    
    19,800
    
    
    
    
    
    
    
    
    
    
    
    1,821
    
    
    
    
    
    
    
    21,621Exercise of stock options
    
    
    1,107
    
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672Employee stock purchase
plan issuances
    
    
    41
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173Amortization of Deferred
Compensation related to
Restricted Stock Awards
    
    
    
    
    
    
    719
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    719Restricted Stock Awards
withheld for payment of
employee tax liability
    
    
    140
    
    
    
    (316
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (316
    )Stock-Based Compensation
Expense
    
    
    
    
    
    
    1,229
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,229BALANCES AT
DECEMBER 31, 2006
    
    
    85,991
    
    
    $
    150,250
    
    
    $
    
    
    
    $
    
    
    
    $
    4,862
    
    
    $
    (84,798
    )
    
    $
    70,314
 37




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##### Table of Contents



Warrants
    
    RetainedCommon Stock
    
    Series A
    
    Series B
    
    to acquire
    
    EarningsAdditional Paid-In-Capital
    
    Preferred
    
    Preferred
    
    Common
    
    (AccumulatedShares
    
    Amount
    
    Stock
    
    Stock
    
    Stock
    
    Deficit)
    
    TotalNet Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,168
    )
    
    
    (19,168
    )Exercise of warrants
into common stock
    
    
    1,306
    
    
    
    4,574
    
    
    
    
    
    
    
    
    
    
    
    (2,067
    )
    
    
    
    
    
    
    2,507Net Proceeds from
issuance of common stock
    
    
    1,000
    
    
    
    6,994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,994Exercise of stock options
    
    
    457
    
    
    
    1,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054Employee stock purchase
plan issuances
    
    
    32
    
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218Amortization of Deferred
Compensation related to
Restricted Stock Awards
    
    
    
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589Restricted Stock Awards
withheld for payment of
employee tax liability
    
    
    115
    
    
    
    (445
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (445
    )Stock-Based Compensation
Expense
    
    
    
    
    
    
    2,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,595BALANCES AT DECEMBER 31,
2007
    
    
    88,901
    
    
    $
    165,829
    
    
    $
    
    
    
    $
    
    
    
    $
    2,795
    
    
    $
    (103,966
    )
    
    $
    64,658
  38




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##### Table of Contents



AKORN, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005OPERATING ACTIVITIESNet loss
    
    $
    (19,168
    )
    
    $
    (5,963
    )
    
    $
    (8,609
    )Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization
    
    
    4,512
    
    
    
    3,344
    
    
    
    5,239Amortization of deferred financing fees
    
    
    
    
    
    
    28
    
    
    
    74Amortization of debt discount
    
    
    
    
    
    
    1,059
    
    
    
    1,237Prepayments to Strides Arcolab Limited
    
    
    
    
    
    
    
    
    
    
    (250
    )Gain on retirement of debt
    
    
    
    
    
    
    
    
    
    
    (1,212
    )Non-cash stock compensation expense
    
    
    3,184
    
    
    
    1,948
    
    
    
    407Changes in operating assets and liabilities:Trade accounts receivable
    
    
    669
    
    
    
    (1,559
    )
    
    
    3,360Inventories
    
    
    (19,361
    )
    
    
    (1,455
    )
    
    
    142Prepaid expenses and other current assets
    
    
    (1,139
    )
    
    
    81
    
    
    
    (198
    )Trade accounts payable
    
    
    9,351
    
    
    
    1,673
    
    
    
    (2,351
    )Product Warranty
    
    
    
    
    
    
    1,308
    
    
    
    Royalty Liability
    
    
    (1,505
    )
    
    
    1,517
    
    
    
    Accrued expenses and other liabilities
    
    
    (1,434
    )
    
    
    528
    
    
    
    2,013NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
    
    
    (24,891
    )
    
    
    2,509
    
    
    
    (148
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (1,784
    )
    
    
    (4,377
    )
    
    
    (1,782
    )Purchase of product intangibles and product licenses
    
    
    (400
    )
    
    
    
    
    
    
    (75
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (2,184
    )
    
    
    (4,377
    )
    
    
    (1,857
    )FINANCING ACTIVITIESRepayments of long-term debt
    
    
    (394
    )
    
    
    (3,103
    )
    
    
    (370
    )Restricted Cash for Revolving Credit Agreement
    
    
    (1,250
    )
    
    
    
    
    
    
    Proceeds from line of credit
    
    
    4,521
    
    
    
    
    
    
    
    Repayment of NeoPharm Debt
    
    
    
    
    
    
    
    
    
    
    (2,500
    )Net proceeds from common stock and warrant offering
    
    
    6,994
    
    
    
    21,621
    
    
    
    Proceeds from exercise of stock warrants
    
    
    2,507
    
    
    
    2,848
    
    
    
    188Proceeds under stock option and stock purchase plans
    
    
    827
    
    
    
    1,529
    
    
    
    1,368NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    13,205
    
    
    
    22,895
    
    
    
    (1,314
    )(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (13,870
    )
    
    
    21,027
    
    
    
    (3,319
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    21,818
    
    
    
    791
    
    
    
    4,110CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    7,948
    
    
    $
    21,818
    
    
    $
    791
  39




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##### Table of Contents



AKORN, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note A  Business and Basis of Presentation
 Business:
 Basis of Presentation:
 Note B  Summary of Significant Accounting Policies
 Consolidation:
 Use of Estimates:
 Revenue Recognition:
   Cash Equivalents:
 Accounts Receivable:
 40




---



##### Table of Contents



Chargebacks and Rebates:
    Sales Returns:
 41




---



##### Table of Contents



Doubtful Accounts:
 
    
    Identified the relevant factors that might affect the accounting estimate for allowance
for doubtful accounts, including: (a) historical experience with collections and write-offs;
(b) credit quality of customers; (c) the interaction of credits being taken for discounts,
rebates, allowances and other adjustments; (d) balances of outstanding receivables, and
partially paid receivables; and (e) economic and other exogenous factors that might affect
collectibility (e.g., bankruptcies of customers, channel factors, etc.).
    
    Accumulated data on which to base the estimate for allowance for doubtful accounts,
including: (a) collections and write-offs data; (b) information regarding current credit
quality of customers; and (c) information regarding exogenous factors, particularly in
respect of major customers.
    
    Developed assumptions reflecting managements judgments as to the most likely
circumstances and outcomes, regarding, among other matters: (a) collectibility of
outstanding balances relating to partial payments; (b) the ability to collect items in
dispute (or subject to reconciliation) with customers; and (c) economic and other exogenous
factors that might affect collectibility of outstanding balances  based upon information
available at the time.
  Inventories:
 Intangibles:
  For the year ended 12/31/08
    
    $
    1,354For the year ended 12/31/09
    
    $
    1,354For the year ended 12/31/10
    
    $
    1,354For the year ended 12/31/11
    
    $
    1,313For the year ended 12/31/12
    
    $
    1,055
 42




---



##### Table of Contents



Property, Plant and Equipment:
 Net Loss Per Common Share:
 Income Taxes:
 Fair Value of Financial Instruments:
 Stock-Based Compensation:
 Warranty Liability:
 Reclassifications:
 43




---



##### Table of Contents



Note C  Allowance for Customer Deductions
  Doubtful Accounts
    
    
    ReturnsYears Ended December 31,
    
    
    Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    3
    
    
    $
    13
    
    
    $
    435
    
    
    $
    2,437
    
    
    $
    1,529
    
    
    $
    1,393Provision (Recovery)
    
    
    (8
    )
    
    
    (150
    )
    
    
    74
    
    
    
    610
    
    
    
    3,861
    
    
    
    3,122(Charges) Credits
    
    
    10
    
    
    
    140
    
    
    
    (496
    )
    
    
    (1,894
    )
    
    
    (2,953
    )
    
    
    (2,986
    )Balance at end of year
    
    $
    5
    
    
    $
    3
    
    
    $
    13
    
    
    $
    1,153
    
    
    $
    2,437
    
    
    $
    1,529
 Discounts
    
    
    Chargebacks and RebatesYears Ended December 31,
    
    
    Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    236
    
    
    $
    244
    
    
    $
    234
    
    
    $
    8,370
    
    
    $
    7,634
    
    
    $
    5,406Provision
    
    
    1,306
    
    
    
    1,595
    
    
    
    1,003
    
    
    
    31,971
    
    
    
    26,295
    
    
    
    24,391Charges
    
    
    (1,185
    )
    
    
    (1,603
    )
    
    
    (993
    )
    
    
    (28,651
    )
    
    
    (25,559
    )
    
    
    (22,163
    )Balance at end of year
    
    $
    357
    
    
    $
    236
    
    
    $
    244
    
    
    $
    11,690
    
    
    $
    8,370
    
    
    $
    7,634
 Note D  Inventories
  December 31,2007
    
    
    2006Finished goods
    
    $
    20,804
    
    
    $
    2,923Work in process
    
    
    2,173
    
    
    
    1,293Raw materials and supplies
    
    
    8,118
    
    
    
    7,518$
    31,095
    
    
    $
    11,734
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    510
    
    
    $
    916
    
    
    $
    660Provision
    
    
    1,449
    
    
    
    652
    
    
    
    530Charges
    
    
    (699
    )
    
    
    (1,058
    )
    
    
    (274
    )Balance at end of year
    
    $
    1,260
    
    
    $
    510
    
    
    $
    916
 44




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##### Table of Contents



Note E  Property, Plant and Equipment
  December 31,2007
    
    
    2006Land
    
    $
    396
    
    
    $
    396Buildings and leasehold improvements
    
    
    18,236
    
    
    
    18,071Furniture and equipment
    
    
    39,030
    
    
    
    37,826Automobiles
    
    
    55
    
    
    
    55
 57,717
    
    
    
    56,348Accumulated depreciation
    
    
    (31,645
    )
    
    
    (28,637
    )26,072
    
    
    
    27,711Construction in progress
    
    
    6,190
    
    
    
    5,775$
    32,262
    
    
    $
    33,486
  Note F  Financing Arrangements
 Mortgage Payable
  Credit Facility
      Notes Payable
  45




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##### Table of Contents



Note G  Preferred Stock and Common Stock
 Series A Preferred Stock
   Series B Preferred Stock
   46




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##### Table of Contents



Common Stock
    47




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##### Table of Contents



Note H  Leasing Arrangements
   Year ending December, 312008
    
    $
    1,5282009
    
    
    1,7002010
    
    
    1,7042011 and thereafter
    
    
    9,690Total
    
    $
    14,622
 Note I  Stock Options, Employee Stock Purchase Plan and Restricted Stock
     48




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##### Table of Contents



2005Net loss as reported
    
    $
    (8,609
    )Add:
stock-based employee compensation expense included in reported net
loss
    
    
    407Deduct: total stock-based employee compensation expense determined under fair-value-based method for all awards
    
    
    (1,441
    )Pro forma net loss
    
    
    (9,643
    )Deduct: preferred stock dividends and adjustments
    
    
    (4,082
    )Pro forma net loss available for common stockholders
    
    $
    (13,725
    )Basic and diluted loss per share of common stockShares used in Computing Net Loss Per Share
    
    
    26,095As reported
    
    $
    (0.49
    )Pro forma
    
    $
    (0.53
    )
  2007
    
    
    2006
    
    
    2005Expected Volatility
    
    
    43% - 47%
    
    
    
    45% - 62%
    
    
    
    59% - 83%Expected Life (in years)
    
    
    3.6 - 4.0
    
    
    
    3.5 - 3.7
    
    
    
    5.0Risk-free interest rate
    
    
    3.8% - 4.8%
    
    
    
    4.6% - 5.0%
    
    
    
    3.9% - 4.4%Dividend yield
    
    
    
    
    
    
    
    
    
    
    Fair value per stock option
    
    
    $2.51
    
    
    
    $1.89
    
    
    
    $1.70
  Weighted AverageNumber of
    
    Weighted
    
    RemainingShares
    
    Average
    
    Contractual Term
    
    Aggregate(in thousands)
    
    Exercise Price
    
    (Years)
    
    Intrinsic ValueOutstanding at January 1, 2007
    
    
    3,155
    
    
    $
    3.22Granted
    
    
    2,268
    
    
    $
    6.34Exercised
    
    
    (457
    )
    
    $
    2.31Forfeited
    
    
    (247
    )
    
    $
    5.61Outstanding at December 31, 2007
    
    
    4,719
    
    
    $
    4.69
    
    
    
    2.8
    
    
    $
    12,518Exercisable at December 31, 2007
    
    
    2,363
    
    
    $
    3.40
    
    
    
    1.9
    
    
    $
    9,309
   49




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##### Table of Contents



Number of Shares
    
    Weighted Average(in thousands)
    
    Grant Date Fair ValueNonvested at December 31, 2006
    
    
    350
    
    
    $
    5.05Granted
    
    
    
    
    
    $
    Vested
    
    
    (175
    )
    
    $
    5.05Canceled
    
    
    
    
    
    $
    Nonvested at December 31, 2007
    
    
    175
    
    
    $
    5.05
 50




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##### Table of Contents



Note J  Income Taxes
  Current
    
    
    Deferred
    
    
    TotalYear ended December 31, 2007Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    3
    
    
    
    
    
    
    
    3$
    3
    
    
    $
    
    
    
    $
    3Year ended December 31, 2006Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    3
    
    
    
    
    
    
    
    3$
    3
    
    
    $
    
    
    
    $
    3Year ended December 31, 2005Federal
    
    $
    15
    
    
    $
    
    
    
    $
    15State
    
    
    2
    
    
    
    
    
    
    
    2$
    17
    
    
    $
    
    
    
    $
    17
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Computed expected tax expense (benefit)
    
    $
    (6,517
    )
    
    $
    (2,027
    )
    
    $
    (2,922
    )Change in income taxes resulting from:State income taxes, net of federal income tax
    
    
    (924
    )
    
    
    (287
    )
    
    
    (414
    )Nondeductible preferred stock accretion and other permanent differences
    
    
    (691
    )
    
    
    (543
    )
    
    
    161Valuation allowance change
    
    
    8,135
    
    
    
    2,860
    
    
    
    3,192Income tax expense (benefit)
    
    $
    3
    
    
    $
    3
    
    
    $
    17
  December 31,
    
    
    December 31,2007
    
    
    2006Deferred income tax assets:Other accrued expenses
    
    $
    284
    
    
    $
    839Intangible assets
    
    
    548
    
    
    
    649Net operating loss carry forward
    
    
    23,295
    
    
    
    15,756Other
    
    
    5,432
    
    
    
    3,73029,559
    
    
    
    20,974Valuation allowance
    
    
    (28,327
    )
    
    
    (20,192
    )1,232
    
    
    
    782Deferred income tax liabilities:Property, plant and equipment, net
    
    
    (1,232
    )
    
    
    (782
    )Net
    
    $
    
    
    
    $
    
   51




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##### Table of Contents



Note K  Retirement Plan
  Note L  Segment Information
    Years ended December 31,2007
    
    
    2006
    
    
    2005REVENUESOphthalmic
    
    $
    18,545
    
    
    $
    19,528
    
    
    $
    22,659Hospital Drugs & Injectables
    
    
    19,475
    
    
    
    42,489
    
    
    
    13,719Biologics & Vaccines
    
    
    7,522
    
    
    
    
    
    
    
    Contract Services
    
    
    7,353
    
    
    
    9,233
    
    
    
    8,106Total revenues
    
    $
    52,895
    
    
    $
    71,250
    
    
    $
    44,484GROSS PROFITOphthalmic
    
    $
    3,784
    
    
    $
    6,069
    
    
    $
    8,069Hospital Drugs and Injectables
    
    
    4,991
    
    
    
    18,114
    
    
    
    5,740Biologics & Vaccines
    
    
    745
    
    
    
    
    
    
    
    Contract Services
    
    
    1,880
    
    
    
    2,697
    
    
    
    1,135Total gross profit
    
    
    11,400
    
    
    
    26,880
    
    
    
    14,944Operating expenses
    
    
    31,215
    
    
    
    31,785
    
    
    
    22,423Operating loss
    
    
    (19,815
    )
    
    
    (4,905
    )
    
    
    (7,479
    )Interest, Debt Retirement gain/(expense) & Other income (expense)
    
    
    650
    
    
    
    (1,055
    )
    
    
    (1,113
    )Loss before income taxes
    
    $
    (19,165
    )
    
    $
    (5,960
    )
    
    $
    (8,592
    )
  52




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##### Table of Contents



Note M  Commitments and Contingencies
        For the year ended 12/31/08
    
    $
    33,881For the year ended 12/31/09
    
    $
    68,251For the year ended 12/31/10
    
    $
    39,812For the year ended 12/31/11
    
    $
    1,000For the year ended 12/31/12
    
    $
    1,0002013 and beyond
    
    $
    2,000
    53




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##### Table of Contents



For the year ended 12/31/08
    
    $
    1,698For the year ended 12/31/09
    
    $
    2,774For the year ended 12/31/10
    
    $
    1,000For the year ended 12/31/11
    
    $
    1,240For the year ended 12/31/12
    
    $
    2013 and
beyond
    
    $
    1,000
 Note N  Supplemental Cash Flow Information (in thousands)
 Year Ended December 31,2007
    
    2006
    
    2005Interest and taxes paid:Interest
    
    $
    72
    
    
    $
    593
    
    
    $
    419Income taxes
    
    
    5
    
    
    
    2
    
    
    
    72
  Note O  Recent Accounting Pronouncements
   Fair Value
Measurements.
  54




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##### Table of Contents



Note P  Business Alliances
   55




---



##### Table of Contents



Note Q  Customer and Supplier Concentration
  56




---



##### Table of Contents



2007
    
    2006
    
    2005Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossGross
    
    Net
    
    Accts
    
    Gross
    
    Net
    
    Accts.
    
    Gross
    
    Net
    
    AcctsSales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    ReceivableAmerisource
    
    
    22
    %
    
    
    17
    %
    
    
    36
    %
    
    
    13
    %
    
    
    9
    %
    
    
    12
    %
    
    
    24
    %
    
    
    16
    %
    
    
    28
    %Cardinal
    
    
    25
    %
    
    
    21
    %
    
    
    25
    %
    
    
    19
    %
    
    
    13
    %
    
    
    24
    %
    
    
    28
    %
    
    
    19
    %
    
    
    29
    %McKesson
    
    
    20
    %
    
    
    15
    %
    
    
    8
    %
    
    
    18
    %
    
    
    11
    %
    
    
    17
    %
    
    
    17
    %
    
    
    11
    %
    
    
    19
    %
    Note R  Subsequent Events
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  57




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
  Attestation Report of the Registered Public Accounting Firm
  Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information.
  58




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions and Director Independence.
  
 Item 14. Principal Accounting Fees and Services.
  59




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    (1) Financial Statements. The consolidated financial statements listed on the index to Item 8
of this Annual Report on Form 10-K are filed as a part of this Annual Report.
 (2)
    
    Financial Statement Schedules.All financial statement schedules have been omitted since
the information is either not applicable or required or is included in the financial
statements or notes thereof.(3)
    
    Exhibits. Those exhibits marked with a (*) refer to exhibits filed herewith. The other
exhibits are incorporated herein by reference, as indicated in the following list. Those
exhibits marked with a () refer to management contracts or compensatory plans or
arrangements. Portions of the exhibits marked with a (W) are the subject of a Confidential
Treatment Request under 17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.24b-2.
 Exhibit No.
    
    Description3.1
    
    Restated Articles of Incorporation of Akorn, Inc. dated September 16, 2004, incorporated by reference
to Exhibit 3.1 to Akorn, Inc.s Registration Statement on Form S-1 filed on September 21, 2004
(Commission file No. 333-119168).3.2
    
    Amended and Restated By-laws of Akorn, Inc., incorporated by reference to Exhibit 3.2 to Akorn, Inc.s
Registration Statement on Form S-1 filed on June 14, 2005 (Commission file No. 333-119168).3.3
    
    Amendment to Bylaws of Akorn, Inc., incorporated by reference to Exhibit 3.1 to Akorn, Inc.s report
on Form 8-K filed on March 31, 2006 (Commission file No. 001-32360).3.4
    
    Amendment to Bylaws of Akorn, Inc., incorporated by reference to Exhibit 3.1 to Akorn, Inc.s report
on Form 8-K filed on December 14, 2006 (Commission file No. 001-32360).3.5
    
    Amendment to Bylaws of Akorn, Inc., incorporated by reference to Exhibit 3.1 to Akorn, Inc.s report
on Form 8-K filed on April 16, 2007.4.1
    
    First Amendment dated October 7, 2003 to Registration Rights Agreement dated July 12, 2001 between
Akorn, Inc. and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 4.1 to
Akorn, Inc.s report on Form 8-K filed on October 24, 2003 (Commission file No. 000-13976).4.2
    
    Form of Warrant Certificate, incorporated by reference to Exhibit 4.2 to Akorn, Inc.s report on Form
8-K filed on October 24, 2003 (Commission file No. 000-13976).4.3
    
    Form of Warrant Agreement dated October 7, 2003 between Akorn, Inc. and certain investors,
incorporated by reference to Exhibit 4.3 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003
(Commission file No. 000-13976).4.4
    
    Warrant Agreement dated October 7, 2003 between Akorn, Inc. and The John N. Kapoor Trust dated
9/20/89, incorporated by reference to Exhibit 4.4 to Akorn, Inc.s report on Form 8-K filed on October
24, 2003 (Commission file No. 000-13976).4.5
    
    Warrant Agreement dated October 7, 2003 between Akorn, Inc. and Arjun C. Waney, incorporated by
reference to Exhibit 4.5 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003 (Commission
file No. 000-13976).4.6
    
    Warrant Agreement dated October 7, 2003 between Akorn, Inc. and The John N. Kapoor Trust dated
9/20/89, incorporated by reference to Exhibit 4.6 to Akorn, Inc.s report on Form 8-K filed on October
24, 2003 (Commission file No. 000-13976).4.7
    
    Warrant Agreement dated October 7, 2003 between Akorn, Inc. and Arjun C. Waney, incorporated by
reference to Exhibit 4.7 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003 (Commission
file No. 000-13976).4.8
    
    Warrant Agreement dated October 7, 2003 between Akorn, Inc. and Argent Fund Management Ltd.,
incorporated by reference to Exhibit 4.8 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003
(Commission file No. 000-13976).
 60




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##### Table of Contents



Exhibit No.
    
    Description4.9
    
    Registration Rights Agreement dated October 7, 2003 among Akorn, Inc. and certain investors,
incorporated by reference to Exhibit 4.9 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003
(Commission file No. 000-13976).4.10
    
    Form of Subscription Agreement between Akorn, Inc. and certain investors, incorporated by reference to
Exhibit 4.1 to Akorn, Inc.s report on Form 8-K filed on August 24, 2004 (Commission file No.
000-13976).4.11
    
    Form of Common Stock Purchase Warrant between Akorn, Inc. and certain investors, incorporated by
reference to Exhibit 4.2 to Akorn, Inc.s report on Form 8-K filed on August 24, 2004 (Commission file
No. 000-13976).4.12
    
    Warrant Purchase and Registration Agreement dated June 18, 2003 between Akorn, Inc. and AEG Partners
LLC, incorporated by reference to Exhibit 4.1 to Akorn, Inc.s report on Form 8-K filed on August 27,
2004 (Commission file No. 000-13976).4.13
    
    Stock Registration Rights Agreement dated November 15, 1990 between Akorn, Inc. and The John N. Kapoor
Trust dated 9/20/89, incorporated by reference to Exhibit 4.12 to Akorn, Inc.s Registration Statement
on Form S-1 filed on September 21, 2004 (Commission file No. 333-119168).4.14
    
    Stock Purchase Agreement dated November 15, 1990 between Akorn, Inc. and The John N. Kapoor Trust
dated 9/20/89, incorporated by reference to Exhibit 4.13 to Akorn, Inc.s Registration Statement on
Form S-1 filed on September 21, 2004 (Commission file No. 333-119168).4.15
    
    Form of Securities Purchase Agreement dated March 1, 2006, between Akorn, Inc. and certain investors
incorporated by reference to Exhibit 4.1 to Akorn, Inc.s report on Form 8-K filed on March 7, 2006.4.16
    
    Form of Warrant issued in connection with the Securities Purchase Agreement dated March 1, 2006
incorporated by reference to Exhibit 4.2 to Akorn, Inc.s report on Form 8-K filed March 7, 2006. (All
warrants are dated March 8, 2006. Please see Exhibit 99.1 of Akorn, Inc.s report on Form 8-K filed
March 14, 2006, which is hereby incorporated by reference, for a schedule setting forth the other
material details for each of the warrants.)4.17
    
    Securities Purchase Agreement dated September 13, 2006, between Akorn, Inc. and Serum Institute of
India, incorporated by reference to Exhibit 4.1 to Akorn Inc.s report on Form 8-K filed September 14,
2006.4.18
    
    Securities Purchase Agreement dated November 14, 2007, between Akorn, Inc. and Serum Institute of
India Ltd., incorporated by reference to Exhibit 4.1 to Akorn, Inc.s report on Form 8-K filed on
November 20, 2007.10.1
    
    Amended and Restated Akorn, Inc. 1988 Incentive Compensation Program, incorporated by reference to
Exhibit 10.2 to Akorn, Inc.s Registration Statement on Form S-1 filed on September 21, 2004
(Commission file No. 333-119168).10.2
    
    1991 Akorn, Inc. Stock Option Plan for Directors, incorporated by reference to Exhibit 10.3 to Akorn,
Inc.s Registration Statement on Form S-1 filed on September 21, 2004 (Commission file No.
333-119168).10.3
    
    Letter of Commitment to Akorn, Inc. from John. N. Kapoor dated April 17, 2001, incorporated by
reference to Exhibit 10.4 to Akorn, Inc.s report on Form 8-K filed on April 25, 2001 (Commission file
No. 000-13976).10.4
    
    Convertible Bridge Loan and Warrant Agreement dated as of July 12, 2001, by and between Akorn, Inc.
and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 10.1 to Akorn, Inc.s
report on Form 8-K filed on July 26, 2001 (Commission file No. 000-13976).10.5
    
    The Tranche A Common Stock Purchase Warrant, dated July 12, 2001, incorporated by reference to Exhibit
10.2 to Akorn, Inc.s report on Form 8-K filed on July 26, 2001 (Commission file No. 000-13976).10.6
    
    The Tranche B Common Stock Purchase Warrant, dated July 12, 2001, incorporated by reference to Exhibit
10.3 to Akorn, Inc.s report on Form 8-K filed on July 26, 2001 (Commission file No. 000-13976).10.7
    
    Registration Rights Agreement dated July 12, 2001, by and between Akorn, Inc. and The John N. Kapoor
Trust dated 9/20/89, incorporated by reference to Exhibit 10.4 to Akorn, Inc.s report on Form 8-K
filed on July 26, 2001 (Commission file No. 000-13976).10.8
    
    Allonge to Revolving Note ($2 million) dated December 20, 2001 by and between Akorn, Inc. and The John
N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 10.14 to Akorn, Inc.s
Registration Statement on Form S-1 filed on September 21, 2004 (Commission file No. 333-119168).
 61




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##### Table of Contents



Exhibit No.
    
    Description10.9
    
    Allonge to Revolving Note ($3 million) dated December 20, 2001 by and between Akorn, Inc. and The John
N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 10.15 to Akorn, Inc.s
Registration Statement on Form S-1 filed on September 21, 2004 (Commission file No. 333-119168).10.10
    
    First Amendment to Convertible Bridge Loan and Warrant Agreement dated December 20, 2001 by and
between Akorn, Inc. and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit
10.16 to Akorn, Inc.s Registration Statement on Form S-1 filed on September 21, 2004 (Commission file
No. 333-119168).10.11
    
    Supply Agreement dated January 4, 2002, by and between Akorn, Inc. and Novadaq Technologies, Inc.,
incorporated by reference to Exhibit 10.22 to Akorn, Inc.s report on Form 10-K for fiscal year ended
December 31, 2001 filed on April 16, 2002 (Commission file No. 000-13976).10.12
    
    Mutual Termination and Settlement Agreements by and between Akorn, Inc. and The Johns Hopkins
University/Applied Physics Laboratory dated. July 3, 2002, incorporated by reference to Exhibit 10.23
to Akorn, Inc.s report on Form 10-K for fiscal year ended December 31, 2001 filed on October 7, 2002
(Commission file No. 000-13976).10.13
    
    Second Amendment to Convertible Bridge Loan and Warrant Agreement dated August 31, 2002 by and between
Akorn, Inc. and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 10.19 to
Akorn, Inc.s Registration Statement on Form S-1 filed on September 21, 2004 (Commission file No.
333-119168).10.14
    
    Amendment to Engagement Letter by and among Akorn, Inc. and AEG Partners LLC dated as of November 21,
2002 incorporated by reference to Exhibit 10.40 to Akorn, Inc.s report on Form 10-K for the fiscal
year ended December 31, 2002, filed on May 21, 2003 (Commission file No. 000-13976).10.15
    
    Third Amendment to Convertible Bridge Loan and Warrant Agreement dated December 31, 2002 by and
between Akorn, Inc. and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit
10.22 to Akorn, Inc.s Registration Statement on Form S-1 filed on September 21, 2004 (Commission file
No. 333-119168).10.16
    
    Offer Letter dated January 22, 2003 from Akorn, Inc. to Arthur S. Przybyl, incorporated by reference
to Exhibit 10.41 to Akorn, Inc.s report on Form 10-K for the fiscal year ended December 31, 2003,
filed on May 21, 2003 (Commission file No. 000-13976).10.17
    
    Indemnification Agreement dated May 15, 2003 by and between Akorn, Inc. and Arthur S. Przybyl,
incorporated by reference to Exhibit 10.42 to Akorn, Inc.s report on Form 10-K for the fiscal year
ended December 31, 2002, filed on May 21, 2003 (Commission file No. 000-13976).10.18
    
    Credit Agreement dated October 7, 2003 among Akorn, Inc., Akorn New Jersey, Inc., the lenders party
thereto and LaSalle Bank National Association, as Administrative Agent, incorporated by reference to
Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on October 24, 2003 (Commission file No.
000-13976).10.19
    
    Form of Indemnity Agreement dated October 7, 2003 between Akorn, Inc. and each of its directors,
incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 10-Q for quarter ended
September 30, 2003, filed on November 19, 2003 (Commission file No. 000-13976).10.20
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., LaSalle Bank and NeoPharm, incorporated by reference to Exhibit 10.4 to Akorn, Inc.s
report on Form 10-Q for quarter ended September 30, 2003, filed on November 19, 2003 (Commission file
No. 000-13976).10.21
    
    Form of Fourth Amendment to Convertible Bridge Loan and Warrant Agreement dated October 7, 2003
between Akorn, Inc. and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit
10.5 to Akorn, Inc.s report on Form 10-Q for quarter ended September 30, 2003, filed on November 19,
2003 (Commission file No. 000-13976).10.22
    
    Limited Waiver Letter dated October 7, 2003 from The John N. Kapoor Trust dated 9/20/89, incorporated
by reference to Exhibit 10.34 to Akorn, Inc.s Registration Statement on Form S-1 filed on September
21, 2004 (Commission file No. 333-119168).10.23
    
    Form of Acknowledgment of Subordination dated October 7, 2003 between Akorn, Inc. and The John N.
Kapoor Trust dated 9/20/89, incorporated by reference to Exhibit 10.6 to Akorn, Inc.s report on Form
10-Q for quarter ended September 30, 2003, filed on November 19, 2003 (Commission file No. 000-13976).
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Exhibit No.
    
    Description10.24
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., LaSalle Bank and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to
Exhibit 10.7 to Akorn, Inc.s report on Form 10-Q for quarter ended September 30, 2003, filed on
November 19, 2003 (Commission file No. 000-13976).10.25
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., LaSalle Bank and The John N. Kapoor Trust dated 9/20/89, incorporated by reference to
Exhibit 10.8 to Akorn, Inc.s report on Form 10-Q for quarter ended September 30, 2003, filed on
November 19, 2003 (Commission file No. 000-13976).10.26
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., LaSalle Bank and Arjun C. Waney, incorporated by reference to Exhibit 10.9 to Akorn,
Inc.s report on Form 10-Q for quarter ended September 30, 2003, filed on November 19, 2003
(Commission file No. 000-13976).10.27
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., LaSalle Bank and Argent Fund Management Ltd, incorporated by reference to Exhibit 10.10
to Akorn, Inc.s report on Form 10-Q for quarter ended September 30, 2003, filed on November 19, 2003
(Commission file No. 000-13976).10.28
    
    Akorn, Inc. 2003 Stock Option Plan, incorporated by reference to Exhibit 10.35 to Akorn, Inc.s report
on Form 10-K for the fiscal year ended December 31, 2003, filed on March 30, 2004 (Commission file No.
000-13976).10.29
    
    Form of Akorn, Inc. Non-Qualified Stock Option Agreement, incorporated by reference to Exhibit 10.36
to Akorn, Inc.s report on Form 10-K for the fiscal year ended December 31, 2003, filed on March 30,
2004 (Commission file No. 000-13976).10.30
    
    Form of Akorn, Inc. Incentive Stock Option Agreement, incorporated by reference to Exhibit 10.37 to
Akorn, Inc.s report on Form 10-K for the fiscal year ended December 31, 2003, filed on March 30, 2004
(Commission file No. 000-13976).10.31
    
    Offer letter dated June 1, 2004 from Akorn, Inc. to Jeffrey A. Whitnell, incorporated by reference to
Exhibit 10.42 to Akorn, Inc.s report on Form 10-K for the fiscal year ended December 31, 2004, filed
March 31, 2005 (Commission file No. 001-32360).10.32
    
    Engagement Letter dated August 5, 2004 between Leerink Swann & Company and Akorn, Inc., incorporated
by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on August 24, 2004 (Commission
file No. 000-13976).10.33
    
    Waiver and Consent dated August 23, 2004, among LaSalle Bank National Association, the financial
institutions party thereto, Akorn, Inc. and Akorn (New Jersey), Inc., incorporated by reference to
Exhibit 10.2 to Akorn, Inc.s report on Form 8-K filed on August 24, 2004 (Commission file No.
000-13976).10.34
    
    Consent and Agreement of Holders of Series A 6.0% Participating Convertible Preferred Stock of Akorn,
Inc. dated as of August 17, 2004, incorporated by reference to Exhibit 10.3 to Akorn, Inc.s report on
Form 8-K filed on August 24, 2004 (Commission file No. 000-13976).10.35
    
    The AEG Stock Purchase Warrant, dated August 31, 2004, incorporated by reference to Exhibit 4.1 to
Akorn, Inc.s report on Form 8-K filed on September 9, 2004 (Commission file No. 000-13976).10.36
    
    Limited Liability Company Agreement dated September 22, 2004 between Akorn, Inc. and Strides Arcolab
Limited, incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on
September 27, 2004 (Commission file No. 000-13976).10.37
    
    OEM Agreement dated September 22, 2004 between Akorn-Strides, LLC and Strides, incorporated by
reference to Exhibit 10.2 to Akorn, Inc.s report on Form 8-K filed on September 27, 2004 (Commission
file No. 000-13976).10.38
    
    Sales and Marketing Agreement dated September 22, 2004 between Akorn, Inc. and Akorn-Strides, LLC,
incorporated by reference to Exhibit 10.3 to Akorn, Inc.s report on Form 8-K filed on September 27,
2004 (Commission file No. 000-13976).10.39
    
    Promissory Note dated September 22, 2004 executed by Akorn-Strides, LLC for the benefit of Akorn,
Inc., incorporated by reference to Exhibit 10.4 to Akorn, Inc.s report on Form 8-K filed on September
27, 2004 (Commission file No. 000-13976).
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Exhibit No.
    
    Description10.40
    
    Capital Contribution Agreement dated September 22, 2004 executed by Strides Arcolab Limited for the
benefit of Akorn-Strides, LLC, incorporated by reference to Exhibit 10.5 to Akorn, Inc.s report on
Form 8-K filed on September 27, 2004 (Commission file No. 000-13976).10.41
    
    Waiver Letter dated September 28, 2004 from The John N. Kapoor Trust dated 9/20/89, incorporated by
reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on September 30, 2004 (Commission
file No. 000-13976).10.42
    
    First Amendment to Credit Agreement dated August 13, 2004 among Akorn, Inc., Akorn New Jersey, Inc.,
Dr. John N. Kapoor, The John N. Kapoor Trust dated 9/20/90, the lenders party thereto and LaSalle Bank
National Association, as Administrative Agent, incorporated by reference to Exhibit 10.1 to Akorn,
Inc.s Report on Form 10-Q for the period ended June 30, 2004, filed on August 13, 2004 (Commission
file No. 000-13976).10.43
    
    Second Amendment to Credit Agreement dated August 26, 2004 among Akorn, Inc., Akorn New Jersey, Inc.,
Dr. John N. Kapoor, The John N. Kapoor Trust dated 9/20/90, the lenders party thereto and LaSalle Bank
National Association, as Administrative Agent, incorporated by reference to Exhibit 10.1 to Akorn,
Inc.s report on Form 8-K filed on August 31, 2004 (Commission file No. 000-13976).10.44
    
    Third Amendment to Credit Agreement dated October 8, 2004 among Akorn, Inc., Akorn New Jersey, Inc.,
the lenders party thereto and LaSalle Bank National Association, as Administrative Agent, incorporated
by reference to Exhibit 10.53 to Akorn, Inc.s Pre-effective Amendment to Registration Statement on
Form S-1 filed October 13, 2004 (Commission file No. 333-119168).10.45
    
    Waiver and Consent dated October 8, 2004, among LaSalle Bank National Association, the financial
institutions party thereto, Akorn, Inc. and Akorn (New Jersey), Inc., incorporated by reference to
Exhibit 10.54 to Akorn, Inc.s Pre-effective Amendment to Registration Statement on Form S-1 filed
October 13, 2004 (Commission file No. 333-119168).10.46
    
    License and Supply Agreement November, 11 2004, between Hameln Pharmaceuticals Gmbh and Akorn, Inc.
incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on November 17,
2004 (Commission file No. 000-13976).10.47
    
    Offer letter dated November 15, 2004, from Akorn, Inc. to Jeffrey A. Whitnell, for position of Senior
Vice President incorporated by reference to Exhibit 10.58 to Akorn, Inc.s report on Form 10-K filed
on March 31, 2005 (Commission file No. 001-32360).10.48
    
    Amended and Restated Akorn, Inc. 2003 Stock Option Plan incorporated by reference to Exhibit 10.59 to
Akorn, Inc.s report on Form 10-K filed on March 31, 2005 (Commission file No. 000-13976).10.49
    
    Amended and Restated Employee Stock Purchase Plan incorporated by reference to Exhibit 10.58 to Akorn,
Inc.s Registration Statement on Form S-1 filed May 10, 2005.10.50
    
    Waiver and Consent to Credit Agreement dated May 13, 2005 between Akorn, LaSalle Bank, the financial
institutions party thereto and Akorn (New Jersey), Inc. incorporated by reference to Exhibit 10.1 to
the Companys report on Form 8-K filed on May 19, 2005 (Commission file No. 333-119168).10.51
    
    Note Repayment Agreement dated May 16, 2005, by and between NeoPharm, Inc. and Akorn, Inc.
incorporated by reference to Exhibit 10.63 to Akorn, Inc.s Registration Statement on Form S-1 filed
on June 14, 2005 (Commission file No. 333-119168).10.52
    
    Fourth Amendment to the Credit Agreement among Akorn, Inc., LaSalle Bank, the financial institutions
party thereto and Akorn (New Jersey), Inc., incorporated by reference to Exhibit 10.1 to Akorn, Inc.s
report on Form 8-K filed on October 5, 2005 (Commission file No. 001-32360).10.53
    
    Master Letter of Credit Agreement among Akorn, Inc., LaSalle Bank, the financial institutions party
thereto and Akorn (New Jersey), Inc., incorporated by reference to Exhibit 10.2 to Akorn, Inc.s
report on Form 8-K filed on October 5, 2005 (Commission file No. 001-32360).10.54
    
    Solicitation/Contract/Order for Commercial Items issued by the HHS to Akorn, Inc. on December 30, 2005.
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Exhibit No.
    
    Description10.55
    
    Executive Bonus Agreement by and between Akorn, Inc. and Arthur S. Przybyl dated December 27, 2005
incorporated by reference to Exhibit 99.1 to the Companys report on Form 8-K filed January 3, 2006
(Commission file No. 001-32360).10.56
    
    Executive Bonus Agreement by and between Akorn, Inc. and Jeffrey A. Whitnell dated December 27, 2005
incorporated by reference to Exhibit 99.2 to the Companys report on Form 8-K filed January 3, 2006
(Commission file No. 001-32360).10.57
    
    Amendment, Waiver and Consent to Credit Agreement dated March 1, 2006, among LaSalle Bank, the
Lenders, Akorn, Inc. and Akorn (New Jersey) incorporated by reference to Exhibit 10.1 to Akorn, Inc.s
report on Form 8-K filed March 7, 2006 (Commission file No. 001-32360).10.58
    
    Waiver and Consent to Credit Agreement dated March 20, 2006 among Akorn, Inc., LaSalle Bank, the
financial institutions party thereto and Akorn (New Jersey), Inc., incorporated by reference to
Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed March 24, 2006 (Commission file No. 001-32360).10.59
    
    Waiver and Consent to Credit Agreement dated March 31, 2006 among Akorn, Inc., LaSalle Bank, the
financial institutions party thereto and Akorn (New Jersey), Inc., incorporated by reference to
Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed March 31, 2006 (Commission file No. 001-32360).10.60
    
    Executive Employment Agreement dated April 24, 2006 between Akorn, Inc., and Arthur S. Przybyl
incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed April 28, 2006
(Commission file No. 001-32360).10.61W
    
    Executive Bonus Agreement dated April 27, 2006 between Akorn, Inc., and Arthur S. Przybyl incorporated
by reference to Exhibit 10.2 to Akorn, Inc.s report on Form 8-K filed April 28, 2006 (Commission file
No. 001-32360).10.62W
    
    Executive Bonus Agreement dated April 27, 2006 between Akorn, Inc., and Jeffrey A. Whitnell
incorporated by reference to Exhibit 10.3 to Akorn, Inc.s report on Form 8-K filed April 28, 2006
(Commission file No. 001-32360).10.63
    
    Waiver and Consent to Credit Agreement dated September 13, 2006, among LaSalle Bank National
Association, the financial institutions party thereto, Akorn, Inc. and Akorn (New Jersey), Inc.
incorporated by reference to Exhibit 10.1 to Akorn Inc.s report on Form 8-K filed September 14, 2006
(Commission file No. 001-32360).10.64
    
    Akorn, Inc. Director Compensation Agreement dated October 26, 2006, incorporated by reference to
Exhibit 10.2 to Akorn, Inc.s report on Form 10-Q filed November 9, 2006 (Commission file No.
001-32360).10.65W
    
    Development and Exclusive Distribution Agreement dated November 7, 2006 between Akorn, Inc. and Serum
Institute of India, Ltd. incorporated by reference to Exhibit 10.1 to Akorn Inc.s report on Form 8-K
filed November 14, 2006 (Commission file No. 001-32360).10.66W
    
    Development Funding Agreement dated November 7, 2006 between Akorn, Inc. and Serum Institute of India,
Ltd. incorporated by reference to Exhibit 10.2 to Akorn Inc.s report on Form 8-K filed November 14,
2006 (Commission file No. 001-32360).10.67
    
    First Amendment to OEM Agreement dated December 8, 2004 between Akorn-Strides, LLC and Strides Arcolab
Limited incorporated by reference to Exhibit 10.2 to Akorn Inc.s report on Form 8-K filed December
12, 2006 (Commission file No. 001-32360).10.68
    
    Second Amendment to OEM Agreement dated December 31, 2004 between Akorn-Strides, LLC and Strides
Arcolab Limited incorporated by reference to Exhibit 10.3 to Akorn Inc.s report on Form 8-K filed
December 12, 2006 (Commission file No. 001-32360).10.69W
    
    Third Amendment to OEM Agreement dated October 26, 2005 between Akorn-Strides, LLC and Strides Arcolab
Limited incorporated by reference to Exhibit 10.4 to Akorn Inc.s report on Form 8-K filed December
12, 2006 (Commission file No. 001-32360).10.70
    
    Fourth Amendment to OEM Agreement dated February 1, 2006 between Akorn-Strides, LLC and Strides
Arcolab Limited incorporated by reference to Exhibit 10.5 to Akorn Inc.s report on Form 8-K filed
December 12, 2006 (Commission file No. 001-32360).
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Exhibit No.
    
    Description10.71W
    
    Fifth Amendment to OEM Agreement dated November 28, 2006 between Akorn-Strides, LLC and Strides
Arcolab Limited incorporated by reference to Exhibit 10.1 to Akorn Inc.s report on Form 8-K filed
December 12, 2006 (Commission file No. 001-32360).10.72
    
    Office Lease dated December 21, 2006, between Akorn, Inc. and Duke Realty Limited Partnership
incorporated by reference to Exhibit 10.1 to Akorn Inc.s report on Form 8-K filed December 28, 2006
(Commission file No. 001-32360).10.73
    
    Amendment to Credit Agreement dated March 5, 2007 between Akorn, Inc., LaSalle Bank, the financial
institutions party thereto and Akorn (New Jersey), Inc. incorporated by reference to Exhibit 10.1 to
Akorn Inc.s report on Form 8-K filed March 6, 2006 (Commission file No. 001-32360).10.74
    
    Addendum 1 to License and Supply Agreement dated November, 11 2004, between Hameln Pharmaceuticals
Gmbh and Akorn, Inc. incorporated by reference to Exhibit 10.74 to Akorn, Inc.s report on Form 10-K
filed March 16, 2007 (Commission file No. 001-32360).10.75
    
    Guaranty and Collateral Agreement dated October 7, 2003, between Akorn, Inc., LaSalle Bank, the
grantors party thereto and Akorn (New Jersey), Inc incorporated by reference to Exhibit 10.74 to
Akorn, Inc.s report on Form 10-K filed March 16, 2007 (Commission file No. 001-32360).10.76W
    
    Exclusive Distribution Agreement dated March 22, 2007 between Akorn, Inc. and the University of
Massachusetts, as represented by the Massachusetts Biological Laboratories incorporated by reference
to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed March 30, 2007.10.77W
    
    2007 Management Bonus Objectives incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on
Form 8-K filed April 23, 2007.10.78
    
    Amendment to Credit Agreement dated August 8, 2007 between Akorn, Inc., LaSalle Bank, the financial
institutions party thereto and Akorn (New Jersey), Inc., incorporated by reference to Exhibit 10.2 to
Akorn, Inc.s report on Form 10-Q filed August 8, 2007.10.79
    
    Industrial Building Lease dated October 23, 2007 between Akorn, Inc. and CV II Gurnee LLC incorporated
by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed October 29, 2007.10.80W
    
    Exclusive Memorandum of Understanding dated October 24, 2007 between Serum Institute of India Ltd. and
Akorn, Inc., incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on
October 30, 2007.10.81
    
    First Amendment to Sales and Marketing Agreement dated September 28, 2007, by and among Akorn-Strides,
LLC, and Akorn, Inc., incorporated by reference to Exhibit 10.2 to Akorn, Inc.s report on Form 10-Q
filed November 8, 2007.10.82
    
    Sixth Amendment to OEM Agreement dated September 28, 2007 between Akorn-Strides, LLC and Strides
Arcolab Limited, incorporated by reference to Exhibit 10.3 to Akorn, Inc.s report on Form 10-Q filed
November 8, 2007.10.83
    
    Amendment to Credit Agreement dated November 2, 2007, by and among LaSalle Bank National Association,
Akorn, Inc. and Akorn (New Jersey), Inc., incorporated by reference to Exhibit 10.6 to Akorn, Inc.s
report on Form 10-Q filed November 8, 2007.10.84
    
    Note (Replacement Note) dated October 7, 2003, by Akorn, Inc. and Akorn (New Jersey), Inc. for the
benefit of LaSalle Bank National Association, issued in connection with the Amendment to Credit
Agreement dated November 2, 2007, incorporated by reference to Exhibit 10.7 to Akorn, Inc.s report on
Form 10-Q filed November 8, 2007.10.85
    
    Waiver and Consent to Credit Agreement dated November 14, 2007, among LaSalle Bank National
Association, certain lenders, Akorn, Inc. and Akorn (New Jersey), Inc., incorporated by reference to
Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on November 20, 2007.10.86*
    
    Amendment to Credit Agreement dated
March 10, 2008, by and among LaSalle Bank National Association,
Akorn, Inc. and Akorn (New Jersey), Inc.21.1
    
    Subsidiaries of Akorn, Inc., incorporated by reference to Exhibit 21.1 to Akorn, Inc.s Pre-effective
Amendment to Registration Statement on Form S-1 filed October 13, 2004 (Commission file No.
333-119168).
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Exhibit No.
    
    Description23.1*
    
    Consent of Independent Registered Public Accountant31.1*
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).31.2*
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).32.1*
    
    Certification of the Chief Executive Officer pursuant to 18 USC Section 1350.32.2*
    
    Certification of the Chief Financial Officer pursuant to 18 USC Section 1350.
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##### Table of Contents



SIGNATURES
  AKORN, INC.By:
    /s/ ARTHUR S. PRZYBYLArthur S. PrzybylChief Executive Officer   Signature
    
    Title
    
    Date/s/ ARTHUR S. PRZYBYL

Arthur S. Przybyl
    
    Chief Executive Officer (Principal Executive Officer)
    
    March 13, 2008/s/ JEFFREY A. WHITNELL

Jeffrey A. Whitnell
    
    Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)
    
    March 13, 2008/s/ DR. JOHN KAPOOR

Dr. John Kapoor
    
    Director, Board Chairman
    
    March 13, 2008/s/ JERRY N. ELLIS

Jerry N. Ellis
    
    Director
    
    March 13, 2008/s/ JERRY TREPPEL

Jerry Treppel
    
    Director
    
    March 13, 2008/s/ RONALD M. JOHNSON

Ronald M. Johnson
    
    Director
    
    March 13, 2008/s/ DR. SUBHASH KAPRE

Dr. Subhash Kapre
    
    Director
    
    March 13, 2008/s/ RANDALL WALL

Randall Wall
    
    Director
    
    March 13, 2008
 68