Exhibit 99.1

Monthly Operating Report for the Period

September 1, 2012 to September 30, 2012

This Monthly Operating Report ("MOR") has been prepared solely for the purposes of complying with the monthly reporting requirements applicable in these Chapter 11 cases and is in a format that the Debtors believe is acceptable to the United States Trustee.  The financial information contained herein is limited in scope and covers a limited time period. Moreover, such information is preliminary and unaudited, and is not prepared in accordance with accounting principles generally accepted in the United States.

I declare under penalty of perjury that this report and the attached documents are true and correct to the best of my knowledge and belief.

CORPORATE MONTHLY OPERATING REPORT

File with the Court and submit a copy to the United States Trustee within 20 days after the end of the month and submit a copy of the report to any official committee appointed in the case.

(Reports for Rochester and Buffalo Divisions of Western District of New York are due 15 days after the end of the month, as are the reports for Southern District of New York.)

NOTES TO MONTHLY OPERATING REPORT

This MOR includes activity from the following Debtors:

General Notes:

The financial statements and supplemental information contained herein are preliminary, unaudited, and may not comply in all material respects with accounting principles generally accepted in the United States ("GAAP").  In addition, the financial statements and supplemental information contained herein represent consolidated information.

The unaudited consolidated financial statements have been derived from the books and records of the Debtors and exclude activity for their non-debtor subsidiaries. This information has not been subject to certain procedures that would typically be applied to financial information in accordance with GAAP, and upon application of such procedures the financial information could be subject to changes, and these changes could be material.

The financial information contained herein is presented on a preliminary and unaudited basis and remains subject to future adjustment. The Debtors are reviewing their books and records and other information on an ongoing basis to determine whether the financial statements should be supplemented or otherwise amended. The Debtors reserve the right to file, at any time, such supplements or amendments to the financial statements that form a part of this MOR. The financial statements should not be considered an admission regarding any of the Debtors' income, expenditures or general financial condition, but rather, a current compilation of the Debtors' books and records. The Debtors do not make, and specifically disclaim, any representation or warranty as to the completeness or accuracy of the information set forth herein.

The unaudited consolidated financial statements contained herein have been prepared on a going concern basis and do not reflect or provide all of the possible consequences of the ongoing chapter 11 cases. Specifically, the unaudited consolidated financial statements do not present the amount which will ultimately be paid to settle liabilities and contingencies which may be required in these cases. As a result of the chapter 11 proceedings, the Debtors may take, or may be required to take, actions which may cause assets to be realized, or liabilities to be liquidated, for amounts other than those reflected in the unaudited consolidated financial statements.

Certain footnote disclosures normally included in unaudited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. The results of operations contained herein are not necessarily indicative of results which may be expected for any other period or for the full year and may not necessarily reflect the consolidated results of operations and financial position of the Debtors in the future.

MOR-1:

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS ¹

(Dollars in thousands)

Debtor		Case Number				Cash Receipts
Ther-Rx Corporation			12-13348			$	4,857
K-V Pharmaceutical Company			12-13347				22
DrugTech Corporation			12-13351				8
K-V Discovery Solutions, Inc			12-13346				0
K-V Generic Pharmaceuticals, Inc			12-13349				0
Zeratech Technologies USA, Inc			12-13350				0
K-V Solutions USA Inc			12-13352				0
FP1096, Inc			12-13353				0
Total Cash Receipts						$	4,887

Debtor		Case Number				Cash 2 Disbursements
K-V Pharmaceutical Company			12-13347			$	(3,171	)
Ther-Rx Corporation			12-13348				(1,195	)
K-V Discovery Solutions, Inc			12-13346				0
K-V Generic Pharmaceuticals, Inc			12-13349				0
Zeratech Technologies USA, Inc			12-13350				0
DrugTech Corporation			12-13351				0
K-V Solutions USA Inc			12-13352				0
FP1096, Inc			12-13353				0
Total Cash Disbursements						$	(4,366	)

 

Notes

1 – Cash is received and disbursed by the Debtors as described in the Debtors' motion to approve continued use of their cash management system (which motion was granted on an interim basis pursuant to an order entered by the Bankruptcy Court on August 7, 2012 and on a second interim basis pursuant to an order entered by the Bankruptcy Court on September 28, 2012) and is consistent with the Debtors' historical cash management practices.  All amounts listed are the balances reported by the bank as of the end of the reporting period. Copies of bank statements will be provided upon reasonable request in writing to counsel for the Debtors.

2 – Cash disbursements include $181 of outstanding checks.

MOR-1 (CON'T):

BANK RECONCILIATIONS ^{1, 2, 3, 4, 5, 6}

(Dollars in thousands)

Debtor		Case Number			Bank and Account Description		Bank Account No. Ending In				Bank Balance
K-V Pharmaceutical Company			12-13347		Fifth Third Money Market / Investment Account			1225			$	21,687
K-V Pharmaceutical Company			12-13347		Fifth Third Bank / Operating Account			9158				8,050
K-V Pharmaceutical Company			12-13347		Fifth Third Bank / Nesher Escrow Account			0383				7,513
K-V Pharmaceutical Company			12-13347		Fifth Third Bank / PDI Escrow Account			1876	5			1,819
K-V Pharmaceutical Company			12-13347		Commerce Bank / Deposit Account			2433				150
K-V Pharmaceutical Company			12-13347		AMEX Centurion Bank / Certificate of Deposit			8420				75
K-V Pharmaceutical Company			12-13347		Bank of America / Payroll Account			6170				29
K-V Pharmaceutical Company			12-13347		Fifth Third Bank / Utility Deposit			0479	6			2
Drug Tech Corporation			12-13351		US Bank / DrugTech Custody Account			3256				12
Drug Tech Corporation			12-13351		Wells Fargo Bank/ DrugTech Operating Acct			6823				1
											$	39,338

 

Notes

1 –The Debtors have not included copies of their bank statements or cash disbursement journals due to the voluminous nature of these reports. Copies of the Debtors' bank statements and cash disbursement journals will be provided upon reasonable request in writing to counsel for the Debtors.

2 –The Debtors reconcile their bank accounts on a monthly basis.

3 –The Debtors have excluded accounts with no balance as of the end of the reporting period.

4 –The Debtors' bank balances exclude $181 of outstanding checks.

5 –This account was inadvertently identified in the Debtors' motion to approve continued use of their cash management system as ending in 4187.

6 –The Debtors opened this bank account post-petition on August 28, 2012 in accordance with the order of the Bankruptcy Court, entered on August 23, 2012, that, among other things, established procedures for providing deposits to the Debtors' utility service providers that request adequate assurance of payment and deemed such utility service providers to have adequate assurance of payment.

MOR-2:

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited; Dollars in thousands)

		For the Month Ended September 30, 2012 1
Net revenues		$	3,989
Cost of sales			(9	)
Gross profit			3,998
Research and development			914
Selling and administrative			7,079
Operating expenses			7,993
Operating loss			(3,995	)
Interest, net and other			0
Reorganization items, net			2,439
Total other expense, net			2,439
Loss from continuing operations before income taxes			(6,434	)
Income tax provision			985
Net loss from continuing operations		$	(7,419	)

 

Notes

1 - The Debtors prepare their income statement on an accrual basis. Accordingly, the Debtors' Statement of Operations, as set forth in this MOR, reflects the results of the Debtors' operations for the month of September.

MOR-3:

CONSOLIDATED BALANCE SHEET

(Unaudited; Dollars in thousands)

		As of September 30,
		2012
ASSETS
Current Assets:
Cash and cash equivalents		$	29,599
Restricted cash			9,557
Receivables, net			8,176
Inventories, net			4,538
Other current assets			4,180
Income taxes receivable			460
Total Current Assets			56,510
Property and equipment, less accumulated depreciation			1,935
Intangible assets, net			121,318
Other assets			15,639
Total Assets		$	195,402
LIABILITIES
LIABILITIES NOT SUBJECT TO COMPROMISE:
Current Liabilities:
Accounts payable		$	2,447
Accrued expenses			19,424
Other current liabilities			9,331
Total Current liabilities			31,202
Total Liabilities not subject to compromise			31,202
Total liabilities subject to compromise			673,247
Total Liabilities			704,449
SHAREHOLDERS' DEFICIT
Preferred Stock			0
Class A Common Stock			643
Class B Common Stock			112
Additional paid-in capital			205,729
Accumulated deficit			(658,122	)
Less: Treasury stock			(57,409	)
Total Shareholders' Deficit			(509,047	)
Total Liabilities and Shareholders' Deficit		$	195,402

 

MOR-4: 

STATUS OF POST-PETITION TAXES ^{1, 2}

(Dollars in thousands)

Federal		Beginning Tax				Amount Withheld and/or Accrued				Amount Paid				Ending Tax
Withholding		$	0			$	262			$	(262	)		$	0
FICA-Employee			0				66				(66	)			0
FICA-Employer			0				86				(86	)			0
Total Federal Taxes		$	0			$	414			$	(414	)		$	0
State and Local
Withholding		$	0			$	70			$	(70	)		$	0
Sales Tax			9				0				0				9
Real Property			4				1				0				5
Personal Property			52				0				0				52
Franchise Tax			(36	)			20				(1	)			(17	)
Total State and Local		$	29			$	91			$	(71	)		$	49
Total Taxes		$	29			$	505			$	(485	)		$	49

 

Notes

1 - The Debtors have not annexed copies of tax returns filed with various taxing authorities during the current reporting period to this MOR, nor have they included the Debtors' IRS Form 6123 with this MOR. Copies of such tax returns and IRS Form 6123 will be provided upon reasonable request in writing to counsel for the Debtors.

2 - The Debtors believe they are paying all undisputed taxes and preparing and filing all tax returns when due or obtaining extensions where necessary.

MOR-4 (CON'T):

SUMMARY OF UNPAID POST-PETITION DEBTS ¹

(Dollars in thousands)

Description		Amount
0 - 30 days old		$	2,440
31+ days old			7
Total Vendor Accounts Payable Post-petition		$	2,447

 

Notes

1 - The Debtors believe they are paying all undisputed post-petition obligations according to terms.  

MOR-5:

ACCOUNTS RECEIVABLE RECONCILIATION AND AGING

(Dollars in thousands)

Description		Amount
0 - 30 days old		$	7,823
31 - 60 days old			132
61 - 90 days old			13
90+ days old			909
Total Customer Accounts Receivable		$	9,066
Customer Allowances			(890	)
Total Accounts Receivable		$	8,176

 

MOR-6:

PAYMENTS TO INSIDERS AND PROFESSIONALS

(Dollars in thousands)

Notes

1 – Additional detail concerning payments to the Debtors' insiders will be provided upon reasonable request in writing to counsel for the Debtors.

PROFESSIONALS

Name		Current Month Amount Paid				Total Paid Since August 4, 2012
Houlihan & Lokey Capital, Inc.		$	199			$	472
Total		$	199			$	472

 

MOR-6 (CON'T):

POST-PETITION STATUS OF SECURED NOTES, LEASES PAYABLE

AND ADEQUATE PROTECTION PAYMENTS¹

(Dollars in thousands)

Name of Creditor		Scheduled Monthly Payment Due				Amount Paid During Month
Building lease payable		$	42			$	42
Total Payments						$	42

 

Notes

1 - The Debtors' schedule of lease payments, as set forth in the MOR, only reflects payments made pursuant to the Debtors' real property lease. Immaterial leases of personal property are not included in this MOR-6.

 MOR-7:

DEBTOR QUESTIONNAIRE

MAKENA^® PERFORMANCE METRICS

Makena® (hydroxyprogesterone caproate injection) is the Debtors' single-most valuable product. The information below addresses certain key performance metrics related to Makena^®. The amounts shown are based on estimates and are subject to change. Gross revenues are preliminary and unaudited, and are not prepared in accordance with GAAP.

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