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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, 2008
 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
(State or other jurisdiction of 
incorporation or organization)
    
    72-0717400
(I.R.S. Employer Identification No.)
 1925 W. Field Court, Suite 300, Lake Forest, Illinois 60045
 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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Forward-Looking Statements and Factors Affecting Future Results
  
    
    Our ability to continue 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;
    
    Our ability to obtain additional funding or financing to operate and grow our business;
    
    The effects of federal, state and other governmental regulation on our business;
    
    Our success in developing, manufacturing, acquiring and marketing new products;
    
    Our success in gaining additional market share for our Td
vaccine purchased by hospitals and
physicians through our key wholesalers, distributors and direct sales channels;
    
    Our ability to make timely payments to our Td vaccine
supplier;
    
    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.
  2




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##### 



FORM 10-K TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    4Item 1A.
    
    Risk Factors
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    19Item 2.
    
    Properties
    
    19Item 3.
    
    Legal Proceedings
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    20PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    21Item 6.
    
    Selected Financial Data
    
    23Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    24Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    36Item 8.
    
    Financial Statements and Supplementary Data
    
    36Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    64Item 9A.
    
    Controls and Procedures
    
    64Item 9B.
    
    Other Information
    
    65PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    66Item 11.
    
    Executive Compensation
    
    66Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    66Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
    
    66Item 14.
    
    Principal Accounting Fees and Services
    
    66PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    67EX-10.72EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2
  3




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##### Table of Contents



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




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Sales and Marketing.
  Research and Development. TM
      5




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6




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Patents, Trademarks and Proprietary Rights.
  Employee Relations.
 Competition.
     Suppliers and Customers.
 7




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
    
    AmerisourceBergen Corporation (AmerisourceBergen)
    
    Cardinal Health, Inc. (Cardinal); and
    
    McKesson Drug Company (McKesson).
  2008
    
    2007Gross
    
    Net
    
    Gross Accounts
    
    Gross
    
    Net
    
    Gross AccountsSales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    ReceivableAmerisourceBergen
    
    
    16
    %
    
    
    12
    %
    
    
    7
    %
    
    
    22
    %
    
    
    17
    %
    
    
    36
    %Cardinal
    
    
    23
    %
    
    
    19
    %
    
    
    41
    %
    
    
    25
    %
    
    
    21
    %
    
    
    25
    %McKesson
    
    
    10
    %
    
    
    14
    %
    
    
    6
    %
    
    
    20
    %
    
    
    15
    %
    
    
    8
    %
  Backorders.
 Government Regulation.
  8




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FDA Warning Letter.
  Product Recalls.
 DEA Regulation.
 Environment
 Foreign Sales
 Seasonality
 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.
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There is
substantial doubt as to our ability to continue as a
going concern.
  Risks relating to our Credit Agreement
 Our lender has restricted our ability to draw on our Credit Agreement.
 .
 Our ability to continue as a going concern depends on our compliance with the terms of our Credit
Agreement, and on the availability of additional financing.
 We have received an extension from our lender pertaining to a loan covenant, but may not receive a
further extension or waiver of the covenant, which would entitle our lender to exercise default
remedies.
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Inadequate liquidity could materially adversely affect our business operations.
  Our lack of liquidity has caused us to be unable to make payments when due under our Exclusive
Distribution Agreement with Massachusetts Biologic Laboratories.
  We must obtain additional capital to continue our operations.
  Unstable market and economic conditions may have serious adverse consequences on our business.
  11




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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.
  Our growth depends on our ability to timely develop additional pharmaceutical products and
manufacturing capabilities.
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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.
  We have accumulated substantial Td vaccine inventory which may be difficult to sell.
  13




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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.
  Certain of our directors are subject to conflicts of interest.
   Dependence on key executive officers.
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Through stock ownership, his position on our board of directors, and his loans to us, Dr. John
Kapoor has substantial influence over our business strategies and policies.
  Recent changes in our senior management may cause uncertainty in, or be disruptive to, our
business.
  We must continue to attract and retain key personnel to be able to compete successfully.
  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.
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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.
  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.
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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.
  18




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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.
  Changes in accounting standards issued by the Financial Accounting Standards Board or other
standard setting bodies may adversely affect our reported revenues, profitability, and financial
condition.
  The requirements of being a public company may strain our resources and distract management.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  19




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Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  20




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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, 20091st Quarter (through March 23, 2009)
    
    $
    2.69
    
    
    $
    1.00Year Ended December 31, 20081st Quarter
    
    $
    8.19
    
    
    $
    4.372nd Quarter
    
    
    5.24
    
    
    
    3.263rd Quarter
    
    
    5.63
    
    
    
    3.144th Quarter
    
    
    5.22
    
    
    
    1.11Year Ended December 31, 20071st Quarter
    
    $
    7.00
    
    
    $
    5.002nd Quarter
    
    
    7.73
    
    
    
    6.103rd Quarter
    
    
    8.00
    
    
    
    6.424th Quarter
    
    
    7.95
    
    
    
    5.82
     
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EQUITY COMPENSATION PLANS
 Equity Compensation Plans Approved by Stockholders
   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:2003 Plan
    
    
    611,125
    
    
    $
    3.23
    
    
    
    2003 Amended Plan
    
    
    3,072,694
    
    
    $
    5.59
    
    
    
    1,323,385Total
    
    
    3,683,819
    
    
    $
    5.20
    
    
    
    1,323,385
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Item 6. Selected Financial Data
  2008
    
    2007
    
    2006
    
    2005
    
    2004OPERATIONS DATA (000s)Revenues
    
    $
    93,598
    
    
    $
    52,895
    
    
    $
    71,250
    
    
    $
    44,484
    
    
    $
    50,708Gross profit
    
    
    26,592
    
    
    
    11,400
    
    
    
    26,880
    
    
    
    14,944
    
    
    
    18,202Operating loss (1)
    
    
    (7,183
    )
    
    
    (19,815
    )
    
    
    (4,905
    )
    
    
    (7,479
    )
    
    
    (368
    )Interest and other income (expense) (2)
    
    
    (752
    )
    
    
    650
    
    
    
    (1,055
    )
    
    
    (1,113
    )
    
    
    (2,650
    )Pretax loss
    
    
    (7,935
    )
    
    
    (19,165
    )
    
    
    (5,960
    )
    
    
    (8,592
    )
    
    
    (3,018
    )Income tax provision (benefit)
    
    
    4
    
    
    
    3
    
    
    
    3
    
    
    
    17
    
    
    
    8Net loss
    
    
    (7,939
    )
    
    
    (19,168
    )
    
    
    (5,963
    )
    
    
    (8,609
    )
    
    
    (3,026
    )Preferred stock dividends and adjustments (3)
    
    
    
    
    
    
    
    
    
    
    (843
    )
    
    
    (4,082
    )
    
    
    (34,436
    )Net loss available to common stockholders
    
    $
    (7,939
    )
    
    $
    (19,168
    )
    
    $
    (6,806
    )
    
    $
    (12,691
    )
    
    $
    (37,462
    )Weighted average shares outstanding:Basic
    
    
    89,209
    
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095
    
    
    
    20,817Diluted
    
    
    89,209
    
    
    
    87,286
    
    
    
    73,988
    
    
    
    26,095
    
    
    
    20,817PER SHAREEquity
    
    $
    0.69
    
    
    $
    0.74
    
    
    $
    0.95
    
    
    $
    1.57
    
    
    $
    2.27Net loss:Basic
    
    
    (0.09
    )
    
    
    (0.22
    )
    
    
    (0.09
    )
    
    
    (0.49
    )
    
    
    (1.80
    )Diluted
    
    
    (0.09
    )
    
    
    (0.22
    )
    
    
    (0.09
    )
    
    
    (0.49
    )
    
    
    (1.80
    )Price: High
    
    
    8.19
    
    
    
    8.00
    
    
    
    6.61
    
    
    
    4.91
    
    
    
    4.30Low
    
    
    1.11
    
    
    
    5.00
    
    
    
    3.01
    
    
    
    2.17
    
    
    
    2.00BALANCE SHEET (000s)Current assets
    
    $
    40,746
    
    
    $
    45,722
    
    
    $
    39,654
    
    
    $
    15,694
    
    
    $
    22,393Net property, plant & equipment
    
    
    34,223
    
    
    
    32,262
    
    
    
    33,486
    
    
    
    31,071
    
    
    
    31,893Total assets
    
    
    82,329
    
    
    
    86,966
    
    
    
    82,083
    
    
    
    57,095
    
    
    
    66,922Current liabilities, including debt in default
    
    
    18,103
    
    
    
    21,000
    
    
    
    10,253
    
    
    
    15,460
    
    
    
    11,160Long-term obligations, less current installments
    
    
    2,783
    
    
    
    1,308
    
    
    
    1,516
    
    
    
    602
    
    
    
    8,436Shareholders equity
    
    
    61,443
    
    
    
    64,658
    
    
    
    70,314
    
    
    
    41,033
    
    
    
    47,326CASH FLOW DATA (000s)From operating activities
    
    $
    (5,420
    )
    
    $
    (24,891
    )
    
    $
    2,509
    
    
    $
    (148
    )
    
    $
    (3,461
    )From investing activities
    
    
    (3,787
    )
    
    
    (2,184
    )
    
    
    (4,377
    )
    
    
    (1,857
    )
    
    
    (838
    )From financing activities
    
    
    2,322
    
    
    
    13,205
    
    
    
    22,895
    
    
    
    (1,314
    )
    
    
    8,191Change in cash and cash equivalents
    
    
    (6,885
    )
    
    
    (13,870
    )
    
    
    21,027
    
    
    
    (3,319
    )
    
    
    3,892
 
 (1)
    
    Operating loss includes long-lived asset impairment charges of $2,037 (in thousands) in 2004.(2)
    
    Interest and other expense includes dividends and discount accretion related to our Series A
Preferred Stock of $1,064 (in thousands). 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. 23




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 RESULTS OF OPERATIONS
      Years EndedDecember 31,2008
    
    2007
    
    2006RevenuesOphthalmic
    
    
    22
    %
    
    
    35
    %
    
    
    27
    %Hospital Drugs & Injectables
    
    
    21
    
    
    
    37
    
    
    
    60Biologics & Vaccines
    
    
    48
    
    
    
    14
    
    
    
    Contract Services
    
    
    9
    
    
    
    14
    
    
    
    13Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100Gross profitOphthalmic
    
    
    6
    %
    
    
    7
    %
    
    
    9
    %Hospital Drugs & Injectables
    
    
    5
    
    
    
    10
    
    
    
    26Biologics & Vaccines
    
    
    14
    
    
    
    1
    
    
    
    Contract Services
    
    
    3
    
    
    
    4
    
    
    
    3Total Gross Profit
    
    
    28
    
    
    
    22
    
    
    
    38Selling, general and administrative expenses
    
    
    27
    
    
    
    41
    
    
    
    26Amortization and write-downs of intangibles
    
    
    2
    
    
    
    3
    
    
    
    2Research and development expenses
    
    
    7
    
    
    
    15
    
    
    
    17Operating loss
    
    
    (8
    )
    
    
    (37
    )
    
    
    (7
    )Net loss
    
    
    (8
    )%
    
    
    (36
    )%
    
    
    (8
    )%
 24




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COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
  TM
   TM
   25




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COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2006
      26




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FINANCIAL CONDITION AND LIQUIDITY
 Overview
       27




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Credit Facility
      28




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Subordinated Debt
   Other Indebtedness
  Preferred Stock and Warrants
 Series A Preferred Stock and Warrants
  29




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Series B Preferred Stock and Warrants
   Other Warrants
 .
  Facility Expansion
  30




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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
    
    $
    5,332
    
    
    $
    5,332
    
    
    $
    
    
    
    $
    
    
    
    $
    Leases
    
    
    13,286
    
    
    
    1,755
    
    
    
    3,529
    
    
    
    2,536
    
    
    
    5,466Inventory Purchase Commitments 1
    
    
    12,750
    
    
    
    6,750
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000Strategic Partners  Contingent Payments 2
    
    
    2,600
    
    
    
    1,550
    
    
    
    1,050
    
    
    
    
    
    
    
    Total:
    
    $
    33,968
    
    
    $
    15,387
    
    
    $
    6,579
    
    
    $
    4,536
    
    
    $
    7,466
 
 1
    
    Estimated purchase commitments under multi-year inventory supply agreements.2
    
    Note the Strategic Partner Payments are estimates which assume that various
contingencies and market opportunities occur in 2009 and beyond. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
  Net Income (Loss)Gross
    
    
    
    
    
    Per Share
    
    Per ShareRevenues
    
    Profit
    
    Amount
    
    Basic
    
    DilutedYear Ended December 31, 2008:1st Quarter
    
    $
    14,459
    
    
    $
    3,747
    
    
    $
    (5,544
    )
    
    $
    (0.06
    )
    
    $
    (0.06
    )2nd Quarter
    
    
    21,229
    
    
    
    4,827
    
    
    
    (2,819
    )
    
    
    (0.03
    )
    
    
    (0.03
    )3rd Quarter
    
    
    31,874
    
    
    
    9,906
    
    
    
    2,401
    
    
    
    0.03
    
    
    
    0.034th Quarter
    
    
    26,036
    
    
    
    8,112
    
    
    
    (1,977
    )
    
    
    (0.02
    )
    
    
    (0.02
    )Year 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
    )
 CRITICAL ACCOUNTING POLICIES
 Revenue Recognition
  Allowance for Chargebacks and Rebates
  31




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Allowance for Product Returns
  32




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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
    33




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##### Table of Contents



Warranty Liability
  Income Taxes
  Intangibles
  Stock-Based Compensation
  RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
  34




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##### Table of Contents



Determination of the Useful Life of
Intangible Assets. Goodwill and Other Intangible Assets Business Combinations,
 35




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 8. Financial Statements and Supplementary Data
   Reports of Independent Registered Public Accounting Firms
    
    
    37Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    40Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    41Consolidated Statements of Shareholders Equity for the years ended December 31, 2008, 2007 and 2006
    
    
    42Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    44Notes to Consolidated Financial Statements
    
    
    45
 36




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
     ,
   
 37




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   .
  
 38




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
         
 39




---



##### Table of Contents



AKORN, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)
 December 31,2008
    
    
    2007ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    1,063
    
    
    $
    7,948Restricted cash  revolving credit agreement
    
    
    
    
    
    
    1,250Trade accounts receivable, net
    
    
    6,529
    
    
    
    4,112Other receivable
    
    
    1,221
    
    
    
    Inventories, net
    
    
    30,163
    
    
    
    31,095Prepaid expenses and other current assets
    
    
    1,770
    
    
    
    1,317TOTAL CURRENT ASSETS
    
    
    40,746
    
    
    
    45,722PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    34,223
    
    
    
    32,262OTHER ASSETSIntangibles, net
    
    
    6,017
    
    
    
    7,721Other
    
    
    1,343
    
    
    
    1,261TOTAL OTHER ASSETS
    
    
    7,360
    
    
    
    8,982TOTAL ASSETS
    
    $
    82,329
    
    
    $
    86,966LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESTrade accounts payable
    
    $
    8,795
    
    
    $
    14,070Accrued compensation
    
    
    1,070
    
    
    
    895Accrued expenses and other liabilities
    
    
    2,906
    
    
    
    1,306Short term subordinated debt  related party
    
    
    5,332
    
    
    
    Revolving line of credit
    
    
    
    
    
    
    4,521Mortgage payable
    
    
    
    
    
    
    208TOTAL CURRENT LIABILITIES
    
    
    18,103
    
    
    
    21,000Lease incentive obligation
    
    
    1,484
    
    
    
    Product warranty liability
    
    
    1,299
    
    
    
    1,308TOTAL LIABILITIES
    
    
    20,886
    
    
    
    22,308COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYCommon stock, no par value  150,000,000
shares authorized; 90,072,662 and 88,900,588
shares issued and outstanding at December
31, 2008 and 2007, respectively
    
    
    170,617
    
    
    
    165,829Warrants to acquire common stock
    
    
    2,731
    
    
    
    2,795Accumulated deficit
    
    
    (111,905
    )
    
    
    (103,966
    )TOTAL SHAREHOLDERS EQUITY
    
    
    61,443
    
    
    
    64,658TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    82,329
    
    
    $
    86,966
  40




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##### Table of Contents



AKORN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    93,598
    
    
    $
    52,895
    
    
    $
    71,250Cost of sales
    
    
    67,006
    
    
    
    41,495
    
    
    
    44,370GROSS PROFIT
    
    
    26,592
    
    
    
    11,400
    
    
    
    26,880Selling, general and administrative expenses
    
    
    25,620
    
    
    
    21,861
    
    
    
    18,603Amortization of intangibles
    
    
    1,354
    
    
    
    1,504
    
    
    
    1,385Research and development expenses
    
    
    6,801
    
    
    
    7,850
    
    
    
    11,797OPERATING EXPENSES
    
    
    33,775
    
    
    
    31,215
    
    
    
    31,785OPERATING LOSS
    
    
    (7,183
    )
    
    
    (19,815
    )
    
    
    (4,905
    )Interest income (expense)
    
    
    (870
    )
    
    
    649
    
    
    
    (604
    )Debt retirement gain/(expense)
    
    
    
    
    
    
    
    
    
    
    (391
    )Equity in earnings of unconsolidated joint venture
    
    
    295
    
    
    
    
    
    
    
    Other income/(expense)
    
    
    (177
    )
    
    
    1
    
    
    
    (60
    )LOSS BEFORE INCOME TAXES
    
    
    (7,935
    )
    
    
    (19,165
    )
    
    
    (5,960
    )Income tax provision
    
    
    4
    
    
    
    3
    
    
    
    3NET LOSS
    
    
    (7,939
    )
    
    
    (19,168
    )
    
    
    (5,963
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (843
    )NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
    
    $
    (7,939
    )
    
    $
    (19,168
    )
    
    $
    (6,806
    )NET LOSS PER COMMON SHARE:BASIC
    
    $
    (0.09
    )
    
    $
    (0.22
    )
    
    $
    (0.09
    )DILUTED
    
    $
    (0.09
    )
    
    $
    (0.22
    )
    
    $
    (0.09
    )SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE:BASIC
    
    
    89,209
    
    
    
    87,286
    
    
    
    73,988DILUTED
    
    
    89,209
    
    
    
    87,286
    
    
    
    73,988
  41




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##### Table of Contents



AKORN, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(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,
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
    )
    
    $
    70,314Net 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
    )
    
    
    64,658Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,939
    )
    
    
    (7,939
    )Exercise of warrants
into common stock
    
    
    50
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    
    
    
    
    37
 42




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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)
    
    TotalExercise of stock options
    
    
    1,012
    
    
    
    2,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,198Employee stock purchase
plan issuances
    
    
    44
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217Amortization of deferred
compensation related to
restricted stock awards
    
    
    66
    
    
    
    745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    745Restricted stock awards
withheld for payment of
employee tax liability
    
    
    
    
    
    
    (158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (158
    )Stock-based compensation
expense
    
    
    
    
    
    
    1,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,685BALANCES AT DECEMBER 31,
2008
    
    
    90,073
    
    
    $
    170,617
    
    
    
    
    
    
    
    
    
    
    $
    2,731
    
    
    $
    (111,905
    )
    
    $
    61,443
  43




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##### Table of Contents



AKORN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006OPERATING ACTIVITIESNet loss
    
    $
    (7,939
    )
    
    $
    (19,168
    )
    
    $
    (5,963
    )Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization
    
    
    4,551
    
    
    
    4,512
    
    
    
    3,344Amortization of deferred financing fees
    
    
    
    
    
    
    
    
    
    
    28Amortization of debt discount
    
    
    
    
    
    
    
    
    
    
    1,059Non-cash stock compensation expense
    
    
    2,430
    
    
    
    3,184
    
    
    
    1,948Gain on disposal of assets
    
    
    (25
    )
    
    
    
    
    
    
    Equity in earnings of unconsolidated joint venture
    
    
    (295
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities:Trade accounts receivable
    
    
    (2,417
    )
    
    
    669
    
    
    
    (1,559
    )Inventories
    
    
    932
    
    
    
    (19,361
    )
    
    
    (1,455
    )Prepaid expenses and other current assets
    
    
    (201
    )
    
    
    (1,139
    )
    
    
    81Other long-term assets
    
    
    1,090
    
    
    
    
    
    
    
    Trade accounts payable
    
    
    (5,275
    )
    
    
    9,351
    
    
    
    1,673Product warranty
    
    
    (9
    )
    
    
    
    
    
    
    1,308Royalty liability
    
    
    57
    
    
    
    (1,505
    )
    
    
    1,517Accrued expenses and other liabilities
    
    
    1,681
    
    
    
    (1,434
    )
    
    
    528NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
    
    
    (5,420
    )
    
    
    (24,891
    )
    
    
    2,509INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (3,354
    )
    
    
    (1,784
    )
    
    
    (4,377
    )Investment in unconsolidated joint venture
    
    
    (507
    )
    
    
    
    
    
    
    Purchase of product intangibles and product licenses
    
    
    
    
    
    
    (400
    )
    
    
    Proceeds from sale of fixed assets
    
    
    74
    
    
    
    
    
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (3,787
    )
    
    
    (2,184
    )
    
    
    (4,377
    )FINANCING ACTIVITIESRepayments of long-term debt
    
    
    (208
    )
    
    
    (394
    )
    
    
    (3,103
    )Restricted cash for revolving credit agreement
    
    
    1,250
    
    
    
    (1,250
    )
    
    
    (Repayments)/proceeds from revolving line of credit
    
    
    (4,521
    )
    
    
    4,521
    
    
    
    Loan origination fees  new revolving line of credit
    
    
    (272
    )
    
    
    
    
    
    
    Net proceeds from common stock and warrant offering
    
    
    
    
    
    
    6,994
    
    
    
    21,621Proceeds from exercise of stock warrants
    
    
    37
    
    
    
    2,507
    
    
    
    2,848Proceeds from subordinated debt  related party
    
    
    5,000
    
    
    
    
    
    
    
    Proceeds under stock option and stock purchase plans
    
    
    1,036
    
    
    
    827
    
    
    
    1,529NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,322
    
    
    
    13,205
    
    
    
    22,895(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (6,885
    )
    
    
    (13,870
    )
    
    
    21,027CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    7,948
    
    
    
    21,818
    
    
    
    791CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    1,063
    
    
    $
    7,948
    
    
    $
    21,818
  44




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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:
   45




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##### Table of Contents



Cash Equivalents:
 Accounts Receivable:
  Chargebacks and Rebates:
    46




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##### Table of Contents



Sales Returns:
 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:
 47




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##### Table of Contents



Intangibles:
  For the year ended December 31, 2009
    
    $
    1,354For the year ended December 31, 2010
    
    
    1,354For the year ended December 31, 2011
    
    
    1,313For the year ended December 31, 2012
    
    
    1,055For the year ended December 31, 2013
    
    
    532
 Property, Plant and Equipment:
 Net Loss Per Common Share:
 Income Taxes:
 Fair Value of Financial Instruments:
 48




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##### Table of Contents



Stock-Based Compensation:
 Warranty Liability:
 49




---



##### Table of Contents



Note C  Allowance for Customer Deductions
  Doubtful Accounts Years Ended
    
    
    ReturnsDecember 31,
    
    
    Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    5
    
    
    $
    3
    
    
    $
    13
    
    
    $
    1,153
    
    
    $
    2,437
    
    
    $
    1,529Provision (recovery)
    
    
    17
    
    
    
    (8
    )
    
    
    (150
    )
    
    
    3,159
    
    
    
    610
    
    
    
    3,861(Charges) credits
    
    
    
    
    
    
    10
    
    
    
    140
    
    
    
    (1,773
    )
    
    
    (1,894
    )
    
    
    (2,953
    )Balance at end of year
    
    $
    22
    
    
    $
    5
    
    
    $
    3
    
    
    $
    2,539
    
    
    $
    1,153
    
    
    $
    2,437
 Discounts
    
    
    Chargebacks and RebatesYears Ended December 31,
    
    
    Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    357
    
    
    $
    236
    
    
    $
    244
    
    
    $
    11,690
    
    
    $
    8,370
    
    
    $
    7,634Provision
    
    
    1,926
    
    
    
    1,306
    
    
    
    1,595
    
    
    
    31,330
    
    
    
    31,971
    
    
    
    26,295Charges
    
    
    (1,961
    )
    
    
    (1,185
    )
    
    
    (1,603
    )
    
    
    (33,709
    )
    
    
    (28,651
    )
    
    
    (25,559
    )Balance at end of year
    
    $
    322
    
    
    $
    357
    
    
    $
    236
    
    
    $
    9,311
    
    
    $
    11,690
    
    
    $
    8,370
 Note D  Inventories
  December 31,2008
    
    
    2007Finished goods
    
    $
    21,000
    
    
    $
    20,804Work in process
    
    
    1,802
    
    
    
    2,173Raw materials and supplies
    
    
    7,361
    
    
    
    8,118$
    30,163
    
    
    $
    31,095
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    1,260
    
    
    $
    510
    
    
    $
    916Provision
    
    
    765
    
    
    
    1,449
    
    
    
    652Charges
    
    
    (846
    )
    
    
    (699
    )
    
    
    (1,058
    )Balance at end of year
    
    $
    1,179
    
    
    $
    1,260
    
    
    $
    510
 50




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##### Table of Contents



Note E  Property, Plant and Equipment
  December 31,2008
    
    
    2007Land
    
    $
    396
    
    
    $
    396Buildings and leasehold improvements
    
    
    19,607
    
    
    
    18,236Furniture and equipment
    
    
    46,297
    
    
    
    39,08566,300
    
    
    
    57,717Accumulated depreciation
    
    
    (32,710
    )
    
    
    (31,645
    )33,590
    
    
    
    26,072Construction in progress
    
    
    633
    
    
    
    6,190$
    34,223
    
    
    $
    32,262
   Note F  Financing Arrangements
 Mortgage Payable
  Credit Facility
   51




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52




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##### Table of Contents



Subordinated Note Payable
  Notes Payable
  Note G  Preferred Stock and Common Stock
 Series A Preferred Stock
  53




---



##### Table of Contents



Series B Preferred Stock
    Common Stock
    54




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##### Table of Contents



Note H  Leasing Arrangements
    Year ending December, 312009
    
    
    1,7552010
    
    
    1,7582011
    
    
    1,7712012
    
    
    1,3122013
    
    
    1,2242014 and thereafter
    
    
    5,466Total
    
    $
    13,286
 Note I  Stock Options, Employee Stock Purchase Plan and Restricted Stock
    55




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##### Table of Contents



2008
    
    2007
    
    2006Expected Volatility
    
    
    43% - 69
    %
    
    
    43% - 47
    %
    
    
    45% - 62
    %Expected Life (in years)
    
    
    4.0
    
    
    
    3.6 - 4.0
    
    
    
    3.5 - 3.7Risk-free interest rate
    
    
    2.2% - 3.2
    %
    
    
    3.8% - 4.8
    %
    
    
    4.6% - 5.0
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    Fair value per stock option
    
    $
    1.66
    
    
    $
    2.51
    
    
    $
    1.89
  Weighted AverageNumber of
    
    Weighted
    
    RemainingShares
    
    Average
    
    Contractual Term
    
    Aggregate(in thousands)
    
    Exercise Price
    
    (Years)
    
    Intrinsic ValueOutstanding at January 1, 2006
    
    
    3,706
    
    
    $
    2.54Granted
    
    
    1,037
    
    
    
    4.71Exercised
    
    
    (1,300
    )
    
    
    2.06Forfeited
    
    
    (288
    )
    
    
    3.91Outstanding at December 31, 2006
    
    
    3,155
    
    
    
    3.22Granted
    
    
    2,268
    
    
    
    6.34Exercised
    
    
    (457
    )
    
    
    2.31Forfeited
    
    
    (247
    )
    
    
    5.61Outstanding at December 31, 2007
    
    
    4,719
    
    
    
    4.69Granted
    
    
    289
    
    
    
    3.92Exercised
    
    
    (1,012
    )
    
    
    2.17Forfeited
    
    
    (313
    )
    
    
    6.11Outstanding at December 31, 2008
    
    
    3,684
    
    
    
    5.20
    
    
    
    2.56
    
    
    $
    43,500Exercisable at December 31, 2008
    
    
    2,179
    
    
    
    4.85
    
    
    
    2.11
    
    
    $
    6,000
    56




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##### Table of Contents



Number of Shares
    
    Weighted Average(in thousands)
    
    Grant Date Fair ValueNonvested at January 1, 2006
    
    
    208
    
    
    $
    2.61Granted
    
    
    350
    
    
    
    5.05Vested
    
    
    (206
    )
    
    
    2.61Canceled
    
    
    (2
    )
    
    
    2.61Nonvested at December 31, 2006
    
    
    350
    
    
    
    5.05Granted
    
    
    
    
    
    
    Vested
    
    
    (175
    )
    
    
    5.05Canceled
    
    
    
    
    
    
    Nonvested at December 31, 2007
    
    
    175
    
    
    
    5.05Granted
    
    
    50
    
    
    
    7.34Vested
    
    
    (100
    )
    
    
    5.34Canceled
    
    
    
    
    
    
    Nonvested at December 31, 2008
    
    
    125
    
    
    $
    5.74
 57




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##### Table of Contents



Note J  Income Taxes
  Current
    
    
    Deferred
    
    
    TotalYear ended December 31, 2008Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    4
    
    
    
    
    
    
    
    4$
    4
    
    
    $
    
    
    
    $
    4Year ended December 31, 2007Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    3
    
    
    
    
    
    
    
    3$
    3
    
    
    $
    
    
    
    $
    3Year ended December 31, 2006Federal
    
    
    3
    
    
    
    
    
    
    
    3State
    
    $
    3
    
    
    $
    
    
    
    $
    3
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Computed expected tax expense (benefit)
    
    $
    (2,699
    )
    
    $
    (6,517
    )
    
    $
    (2,027
    )Change in income taxes resulting from:State income taxes, net of federal income tax
    
    
    (383
    )
    
    
    (924
    )
    
    
    (287
    )Other permanent differences
    
    
    76
    
    
    
    (691
    )
    
    
    (543
    )Valuation allowance change
    
    
    3,010
    
    
    
    8,135
    
    
    
    2,860Income tax expense (benefit)
    
    $
    4
    
    
    $
    3
    
    
    $
    3
  December 31,
    
    
    December 31,2008
    
    
    2007Deferred tax assets:Net operating loss carry forward
    
    $
    25,345
    
    
    $
    23,295Other accrued expenses
    
    
    421
    
    
    
    284Intangible assets
    
    
    447
    
    
    
    548Other items, net
    
    
    6,935
    
    
    
    5,432Total deferred tax assets
    
    
    33,148
    
    
    
    29,559Deferred tax liabilities:Property, plant and equipment, net
    
    
    (1,811
    )
    
    
    (1,232
    )Net deferred tax asset
    
    
    31,337
    
    
    
    28,327Valuation allowance
    
    
    (31,337
    )
    
    
    (28,327
    )Net deferred taxes
    
    $
    
    
    
    $
    
   58




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##### Table of Contents



Note K  Retirement Plan
  Note L  Segment Information
    Years ended December 31,2008
    
    
    2007
    
    
    2006REVENUESOphthalmic
    
    $
    20,447
    
    
    $
    18,545
    
    
    $
    19,528Hospital Drugs & Injectables
    
    
    19,627
    
    
    
    19,475
    
    
    
    42,489Biologics & Vaccines
    
    
    44,602
    
    
    
    7,522
    
    
    
    Contract Services
    
    
    8,922
    
    
    
    7,353
    
    
    
    9,233Total revenues
    
    $
    93,598
    
    
    $
    52,895
    
    
    $
    71,250GROSS PROFITOphthalmic
    
    $
    5,752
    
    
    $
    3,784
    
    
    $
    6,069Hospital Drugs and Injectables
    
    
    5,049
    
    
    
    4,991
    
    
    
    18,114Biologics & Vaccines
    
    
    13,210
    
    
    
    745
    
    
    
    Contract Services
    
    
    2,581
    
    
    
    1,880
    
    
    
    2,697Total gross profit
    
    
    26,592
    
    
    
    11,400
    
    
    
    26,880Operating expenses
    
    
    33,775
    
    
    
    31,215
    
    
    
    31,785Operating loss
    
    
    (7,183
    )
    
    
    (19,815
    )
    
    
    (4,905
    )Interest, debt retirement gain/(expense) and other income (expense)
    
    
    (752
    )
    
    
    650
    
    
    
    (1,055
    )Loss before income taxes
    
    $
    (7,935
    )
    
    $
    (19,165
    )
    
    $
    (5,960
    )
 59




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##### Table of Contents



Note M  Commitments and Contingencies
       60




---



##### Table of Contents



For the year ended December 31, 2009
    
    $
    6,750For the year ended December 31, 2010
    
    
    1,000For the year ended December 31, 2011
    
    
    1,000For the year ended December 31, 2012
    
    
    1,000For the year ended December 31, 2013
    
    
    1,0002014 and beyond
    
    
    2,000
     For the year ended December 31, 2009
    
    $
    1,550For the year ended December 31, 2010
    
    
    850For the year ended December 31, 2011
    
    
    200
  61




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##### Table of Contents



Note N  Supplemental Cash Flow Information (in thousands)
 Year Ended December 31,2008
    
    2007
    
    2006Leasehold improvements funded by lessor
    
    $
    1,768
    
    
    $
    
    
    
    $
    Assets acquired through capital lease
    
    
    85
    
    
    
    
    
    
    
    Interest and taxes paid:Interest
    
    $
    633
    
    
    $
    72
    
    
    $
    593Income taxes
    
    
    4
    
    
    
    5
    
    
    
    2
  Note O  Recent Accounting Pronouncements
 Fair Value Measurements
    Determination of the Useful Life of
Intangible Assets. Goodwill and Other Intangible Assets Business Combinations,
 62




---



##### Table of Contents



Note P  Business Alliances
     Note Q  Customer and Supplier Concentration
  63




---



##### Table of Contents



2008
    
    2007
    
    2006Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossGross
    
    Net
    
    Accts
    
    Gross
    
    Net
    
    Accts.
    
    Gross
    
    Net
    
    AcctsSales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    Receivable
    
    Sales
    
    Revenue
    
    ReceivableAmerisource
    
    
    16
    %
    
    
    12
    %
    
    
    7
    %
    
    
    22
    %
    
    
    17
    %
    
    
    36
    %
    
    
    13
    %
    
    
    9
    %
    
    
    12
    %Cardinal
    
    
    23
    %
    
    
    19
    %
    
    
    41
    %
    
    
    25
    %
    
    
    21
    %
    
    
    25
    %
    
    
    19
    %
    
    
    13
    %
    
    
    24
    %McKesson
    
    
    10
    %
    
    
    14
    %
    
    
    6
    %
    
    
    20
    %
    
    
    15
    %
    
    
    8
    %
    
    
    18
    %
    
    
    11
    %
    
    
    17
    %
    Note R  Related Party Transaction
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  64




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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.
 Material Agreement Amendment
     Appointment of Interim Chief Executive Officer
    65




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Code of Ethics
   
 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.
  66




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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.
 Financial Statement Schedules.
 Exhibits W
 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).
 67




---



##### 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
 68




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##### Table of Contents



Exhibit No.
    
    Descriptionfiled on September 21, 2004 (Commission file No. 333-119168).10.9
    
    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
    
    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).10.17
    
    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).10.18
    
    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).10.19
    
    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).10.20
    
    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).10.21
    
    Form of Subordination and Intercreditor Agreement dated October 7, 2003 among Akorn, Inc., Akorn (New
Jersey), Inc., Bank of America 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).10.22
    
    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).10.23
    
    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
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Exhibit No.
    
    DescriptionNo. 000-13976).10.24
    
    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).10.25
    
    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).10.26
    
    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).10.27
    
    Waiver and Consent dated August 23, 2004, among Bank of America 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).10.28
    
    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).10.29
    
    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).10.30
    
    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).10.31
    
    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).10.32
    
    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).10.33
    
    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).10.34
    
    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).10.35
    
    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).10.36
    
    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 Bank of
America 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).10.37
    
    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).10.38
    
    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).10.39
    
    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).
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Exhibit No.
    
    Description10.40
    
    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, 2005.10.41
    
    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).10.42
    
    Solicitation/Contract/Order for Commercial Items issued by the HHS to Akorn, Inc. on December 30, 2005.10.43
    
    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).10.44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).10.45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).10.46
    
    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).10.47W
    
    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).10.48W
    
    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).10.49
    
    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).10.50
    
    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).10.51W
    
    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).10.52
    
    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).10.53W
    
    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).10.54
    
    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).
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Exhibit No.
    
    Description10.55
    
    Amendment to Credit Agreement dated March 5, 2007 between Akorn, Inc., Bank of America, 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).10.56
    
    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).10.57W
    
    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, 2007.10.58W
    
    2007 Management Bonus Objectives incorporated by reference to Exhibit 10.1 to Akorn, Inc.s report on
Form 8-K filed April 23, 2007.10.59
    
    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, 2007.10.60W
    
    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, 2007.10.61
    
    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, 2007.10.62
    
    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, 2007.10.63W
    
    Binding Term Sheet dated July 3, 2008, by and between Akorn, Inc. and Massachusetts Biologic
Laboratories of the University of Massachusetts Medical School, incorporated by reference to Exhibit
10.1 to Akorn, Inc.s report on Form 8-K filed on July 11, 2008.10.64W
    
    Amendment to Exclusive Distribution Agreement dated July 3, 2008, by and between Akorn, Inc. and
Massachusetts Biologic Laboratories of the University of Massachusetts Medical School, incorporated by
reference to Exhibit 10.1 to Akorn, Inc.s report on Form 8-K filed on July 18, 2008.10.65
    
    Mutual Release dated July 3, 2008, by and between Akorn, Inc. and Massachusetts Biologic Laboratories
of the University of Massachusetts Medical School, incorporated by reference to Exhibit 10.2 to Akorn,
Inc.s report on Form 8-K filed on July 18, 2008.10.66
    
    Subordinated Promissory Note dated July 28, 2008, issued by Akorn, Inc. to The John N. Kapoor Trust
Dated September 20, 1989, in the principal amount of $5,000,000, incorporated by reference to Exhibit
10.1 to Akorn, Inc.s report on Form 8-K filed on August 1, 2008.10.67
    
    Subordination and Intercreditor Agreement dated July 28, 2008, by and among Akorn, Inc., The John N.
Kapoor Trust Dated September 20, 1989, LaSalle Bank National Association, as administrative agent for
all senior lenders party to the senior credit agreement, and Akorn (New Jersey), Inc., incorporated by
reference to Exhibit 10.2 to Akorn, Inc.s report on Form 8-K filed on August 1, 2008.10.68W
    
    Second Amendment to Exclusive Distribution Agreement dated July 30, 2008, by and between, Akorn, Inc.
and Massachusetts Biologic Laboratories of the University of Massachusetts Medical School,
incorporated by reference to Exhibit 10.9 to Akorn, Inc.s report on Form 10-Q filed August 8, 2008.10.69W
    
    Third Amendment to Exclusive Distribution Agreement dated August 1, 2008, by and between, Akorn, Inc.
and Massachusetts Biologic Laboratories of the University of Massachusetts Medical School,
incorporated by reference to Exhibit 10.10 to Akorn, Inc.s report on Form 10-Q filed August 8, 2008.
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Exhibit No.
    
    Description10.70
    
    Commitment Letter dated November 2, 2008, by and between Akorn, Inc. and General Electric Capital
Corporation, incorporated by reference to Exhibit 10.1 to Akorn Inc.s report on Form 8-K filed on
November 5, 2008.10.71
    
    Credit Agreement dated January 7, 2009, by and between Akorn, Inc., Akorn (New Jersey), Inc. and
General Electric Capital Corporation, incorporated by reference to Exhibit 10.1 to Akorn Inc.s report
on Form 8-K filed on January 9, 2009.10.72*W
    
    Letter Agreement dated March 27, 2009 between Akorn, Inc. and Massachusetts Biologic
Laboratories of the University of Massachusetts Medical School.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).23.1*
    
    Consent of Independent Registered Public Accountant23.2*
    
    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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SIGNATURES
  AKORN, INC.By:
    JEFFREY A. WHITNELLJeffrey A. WhitnellInterim Chief Executive Officer   Signature
    
    Title
    
    Date/s/ JEFFREY A. WHITNELL

Jeffrey A. Whitnell
    
    Interim Chief Executive Officer
    
    March 29, 2009/s/ JEFFREY A. WHITNELL

Jeffrey A. Whitnell
    
    Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
    
    March 29, 2009/s/ DR. JOHN KAPOOR

Dr. John Kapoor
    
    Director, Board Chairman
    
    March 29, 2009/s/ JERRY N. ELLIS

Jerry N. Ellis
    
    Director
    
    March 29, 2009/s/ JERRY TREPPEL

Jerry Treppel
    
    Director
    
    March 29, 2009/s/ RONALD M. JOHNSON

Ronald M. Johnson
    
    Director
    
    March 29, 2009/s/ DR. SUBHASH KAPRE

Dr. Subhash Kapre
    
    Director
    
    March 29, 2009/s/ RANDALL WALL

Randall Wall
    
    Director
    
    March 29, 2009
 74