UST Form 11-MOR

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

RICHMOND DMSION

In Re. PSI Liquidation, Inc. §

§

________________ §

Case No. 21-30660

Lead Case No. 21-30660 ---------

Debtor(s) IZI Jointly Administered

Monthly Operating Report Chapter 11

Petition Date: 03/02/2021 Reporting Period Ended: 08/28/2021

Months Pending: 6

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Ind us try Classification: I 4 5 3 2

Reporting Method: Accrual Basis (,, CashBasis ('

Debtor's Full-Time Employees (current): 0

Debtor's Full-Time Employees (as of date of order for relief): 1,700

Supporting Documentation ( check all that are attached): (For jointly administered debtors, any required schedules must be provided on a non-consolidated basis for each debtor)

IZ! Statement of cash receipts and disbursements � Balance sheet containing the summary and detail of the assets, liabilities and equity (net worth) or deficit cg] Statement of operations (profit or loss statement) cg] Accounts receivable aging cg] Postpetition liabilities aging 0 Statement of capital assets IZ! Schedule of payments to professionals 1ZJ Schedule of payments to insiders D All bank statements and bank reconciliations for the reporting period D Description of the assets sold or transferred and the terms of the sale or transfer

Is/

SignanireofResponsibarty 09/30/2021 Date

Matthew Kahn Printed Name of Responsible Party

1700 Broadway, Floor 19, New York NY 10019 Address

STATEMENT: This Periodic Report is associated with an open bankruptcy case; therefore, Paperwork Reduction Act exemption 5 C.F.R. § 1320.4(a)(2) applies.

UST Form 11-MOR (06/07/2021)

Case 21-30660-KLP Doc 794 Filed 10/01/21 Entered 10/01/21 14:19:57 Desc MainDocument Page 1 of 14

UST Form 11-MOR (06/07/2021) 2

Debtor's Name PSI Liquidation, Inc. Case No. 21-30660

Part 1: Cash Receipts and Disbursements Current Month Cumulative

a. Cash balance beginning of month $4,034,835

b. Total receipts (net of transfers between accounts) $0 $57,536,669

c. Total disbursements (net of transfers between accounts) $1,115,674 $64,302,600

d. Cash balance end of month (a+b-c) $2,919,161

e. Disbursements made by third party for the benefit of the estate $0 $40,719,188

f. Total disbursements for quarterly fee calculation (c+e) $1,115,674 $105,021,788

Part 2: Asset and Liability Status Current Month(Not generally applicable to Individual Debtors. See Instructions.)a. Accounts receivable (total net of allowance) $0

b. Accounts receivable over 90 days outstanding (net of allowance) $0

c. Inventory ( (attach explanation))Book Market Other $0

d Total current assets $2,919,161

e. Total assets $2,919,161

f. Postpetition payables (excluding taxes) $0

g. Postpetition payables past due (excluding taxes) $0

h. Postpetition taxes payable $0

i. Postpetition taxes past due $0

j. Total postpetition debt (f+h) $0

k. Prepetition secured debt $0

l. Prepetition priority debt $0

m. Prepetition unsecured debt $87,444,857

n. Total liabilities (debt) (j+k+l+m) $87,444,857

o. Ending equity/net worth (e-n) $-84,525,696

Part 3: Assets Sold or Transferred Current Month Cumulative

a. Total cash sales price for assets sold/transferred outside the ordinarycourse of business $0 $108,012,892

b. Total payments to third parties incident to assets being sold/transferredoutside the ordinary course of business $0 $3,225,000

c. Net cash proceeds from assets sold/transferred outside the ordinarycourse of business (a-b) $0 $104,787,892

Part 4: Income Statement (Statement of Operations) Current Month Cumulative(Not generally applicable to Individual Debtors. See Instructions.)

a. Gross income/sales (net of returns and allowances) $0

b. Cost of goods sold (inclusive of depreciation, if applicable) $0

c. Gross profit (a-b) $0

d. Selling expenses $0

e. General and administrative expenses $-20,000

f. Other expenses $-676,871

g. Depreciation and/or amortization (not included in 4b) $0

h. Interest $0

i. Taxes (local, state, and federal) $0

j. Reorganization items $0

k. Profit (loss) $-696,871 $-25,571,467


UST Form 11-MOR (06/07/2021) 3


Part 5: Professional Fees and Expenses

Approved Current Month

Approved Cumulative

Paid Current Month

Paid Cumulative

a. Debtor's professional fees & expenses (bankruptcy) Aggregate Total $379,931 $6,557,047 $829,773 $9,138,012

Itemized Breakdown by Firm

Firm Name Role

i Willkie Farr & Gallagher LLP Lead Counsel $159,592 $2,690,915 $127,925 $2,153,172

ii Whiteford Taylor & Preston, LLLocal Counsel $47,201 $343,113 $37,761 $274,633

iii SSG Capital Advisors, LLC Financial Professional $0 $0 $0 $3,305,213

iv M-III Advisory Partners, LP Financial Professional $173,137 $1,757,760 $138,644 $1,406,557

v Epiq Corporate Restructuring, LOther $0 $15,260 $44,139 $348,437

vi A&G Realty Partners LLC Financial Professional $0 $1,750,000 $481,305 $1,650,000

Approved Current Month

Approved Cumulative

Paid Current Month

Paid Cumulative

b. Debtor's professional fees & expenses (nonbankruptcy) Aggregate Total $0 $0 $0 $0

Itemized Breakdown by Firm

Firm Name Role

i RSM US LLP Other $0 $0 $0 $0

ii $0

c. All professional fees and expenses (debtor & committees) $452,204 $7,049,075 $829,773 $9,473,988

Part 6: Postpetition Taxes Current Month Cumulative

a. Postpetition income taxes accrued (local, state, and federal) $0 $0

b. Postpetition income taxes paid (local, state, and federal) $0 $0

c. Postpetition employer payroll taxes accrued $0 $534,824

d. Postpetition employer payroll taxes paid $0 $534,824

e. Postpetition property taxes paid $0 $0

f. Postpetition other taxes accrued (local, state, and federal) $0 $3,707,212

g. Postpetition other taxes paid (local, state, and federal) $0 $2,883,551

Part 7: Questionnaire - During this reporting period:

a. Were any payments made on prepetition debt? (if yes, see Instructions) Yes No

b. Yes NoWere any payments made outside the ordinary course of businesswithout court approval? (if yes, see Instructions)

c. Yes NoWere any payments made to or on behalf of insiders?

d. Yes NoAre you current on postpetition tax return filings?

e. Yes NoAre you current on postpetition estimated tax payments?

f. Were all trust fund taxes remitted on a current basis? Yes No

g. Yes NoWas there any postpetition borrowing, other than trade credit?(if yes, see Instructions)

h. Were all payments made to or on behalf of professionals approved bythe court?

Yes No N/A


UST Form 11-MOR (06/07/2021) 4


i. Do you have: Worker's compensation insurance? Yes No

If yes, are your premiums current? Yes No N/A (if no, see Instructions)

Casualty/property insurance? Yes No


General liability insurance? Yes No


j. Has a plan of reorganization been filed with the court? Yes No

k. Has a disclosure statement been filed with the court? Yes No

l. Are you current with quarterly U.S. Trustee fees asset forth under 28 U.S.C. § 1930?

Yes No

Part 8: Individual Chapter 11 Debtors (Only)

a. Gross income (receipts) from salary and wages $0

b. Gross income (receipts) from self-employment $0

c. Gross income from all other sources $0

d. Total income in the reporting period (a+b+c) $0

e. Payroll deductions $0

f. Self-employment related expenses $0

g. Living expenses $0

h. All other expenses $0

i. Total expenses in the reporting period (e+f+g+h) $0

j. Difference between total income and total expenses (d-i) $0

k. List the total amount of all postpetition debts that are past due $0

l. Are you required to pay any Domestic Support Obligations as defined by 11U.S.C § 101(14A)?

Yes No

m. Yes No N/AIf yes, have you made all Domestic Support Obligation payments?



Privacy Act Statement 28 U.S.C. § 589b authorizes the collection of this information, and provision of this information is mandatory under 11 U.S.C. §§ 704, 1106, and 1107. The United States Trustee will use this information to calculate statutory fee assessments under 28U.S.C. § 1930(a)(6). The United States Trustee will also use this information to evaluate a chapter 11 debtor's progressthrough the bankruptcy system, including the likelihood of a plan of reorganization being confirmed and whether the case isbeing prosecuted in good faith. This information may be disclosed to a bankruptcy trustee or examiner when the informationis needed to perform the trustee's or examiner's duties or to the appropriate federal, state, local, regulatory, tribal, or foreignlaw enforcement agency when the information indicates a violation or potential violation oflaw. Other disclosures may bemade for routine purposes. For a discussion of the types of routine disclosures that may be made, you may consult theExecutive Office for United States Trustee's systems of records notice, UST-001, "Bankruptcy Case Files and AssociatedRecords." See 11 Fed. Reg. 59,818 et seq. (Oct. 11, 2006). A copy of the notice may be obtained at the following link: http://www.justice.gov/ust/eo/rules _regulations/index.htm. Failure to provide this information could result in the dismissal orconversion of your bankruptcy case or other action by the United States Trustee. 11 U.S.C. § 1112(b)(4)(F).

I declare under penalty of perjury that the foregoing Monthly Operating Report and its supporting documentation are true and correct and that I have been authorized to sign this report on behalf of the estate.

!,j �;(ft---_ Signature of Responsible Party

Responsible Officer / Director

Title

UST Form I I-MOR (06/07/2021) 5

Matthew Kahn

Printed Name of Responsible Party

09/30/2021

Date


CASE NAME: PSI LIQUIDATION, INC.CASE NUMBER: 21-30660Notes

Notes to the Monthly Operating Report

General:The report includes activity from the following Debtor and its related Case Number:

Debtor Case NumberPaper Source, Inc. 21-30660

Notes to the MOR:Paper Source, Inc. is filing its Monthly Operating Report (“MOR”) solely for the purposes of complying with the monthly operating report requirements applicable in the Debtor’s chapter 11 cases. The financial and supplemental information contained herein is presented on a preliminary and unaudited basis, remains subject to future adjustments and may not comply in all material respects with generally accepted accounting principles in United States of America (“U.S. GAAP”). This MOR should not be relied on by any persons for information relating to current or future financial conditions,events, or performance of any of the Debtors or their affiliates. Balance Sheet, Income Statement, and Statement of Cash Flow items for Paper Source, Inc. are maintained on a fiscal month basis(August 1, 2021 - August 28, 2021). Financial information presented in this MOR reflects results on anon-consolidated basis for this Debtor.

The financial information has been derived from the books and records of the Debtor. The informationfurnished in this report includes primarily normal recurring adjustments, but does not include alladjustments that would typically be made for financial statements prepared in accordance with U.S. GAAP.

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 combined results of operationsand financial positions of the Debtors in the future. The Debtors reserve all rights to amend or supplementthis MOR in all respects, as may be necessary or appropriate. Nothing contained in this MOR shallconstitute a waiver of any of the Debtors’ rights or an admission with respects to their chapter 11 cases.

On May 27, 2021, the Closing Date (as defined in the Asset Purchase Agreement), the Debtorscompleted the sale of Purchased Assets to the Purchaser pursuant to the Asset Purchase Agreement,which was approved in the Order (I) Approving the Sale of Substantially All of the Debtors’ Assets Freeand Clear of All Liens, Claims, Encumbrances and Interests; (II) Authorizing the Assumption andAssignment of Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief(the “Sale Order”) [Docket No. 486]. As part of the transaction, the Debtor's Prepetition Senior Term Loan and Line of Credit were satisfied through cash payments and rolled new financing.

For the purposes of this MOR, the Debtors have represented the prepetition secured second lien termloan as an outstanding unsecured liability.

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CASE NAME: PSI LIQUIDATION, INC.CASE NUMBER: 21-30660MOR-1

August2021

ASSETS(1)(2)

Current assetsCash and cash equivalents $2,919,161Accounts receivable –Merchandise inventories, net –Prepaid expenses and other current assets –Refundable income taxes –Total current assets $2,919,161Property and equipment, net –Other assetsGoodwill –Intangible assets, net –Other long term assets –Total other assets –Total assets $2,919,161

LIABILITIES AND SHAREHOLDERS' EQUITY(1)

Current liabilitiesAccounts payable(3) $26,694,469Current portion of senior term loan –Line of credit –Income taxes payable(4) –Current portion of deferred rent –Other current liabilities –Total current liabilities $26,694,469Long term liabilitiesSenior term loan –Junior term loan(5) 31,265,402Deferred taxes(6) 11,394,993Stock warrants liability 4,500,000Deferred rent(7) 13,589,993Total long term liabilities $60,750,388Total liabilities $87,444,857Shareholders' equityPreferred Stock –Common stock –Series A common stock 9,980Series D common stock 20Additional paid in capital 177,572,585Retained earnings(8) (262,108,281)Total shareholders' equity ($84,525,696)Total liabilities and shareholders' equity $2,919,161Notes:(1) Non-Consolidated Balance Sheet reflects the remaining assets of the estate and does not include assets or liabilities sold on May 27, 2021 to the Purchaser, as defined in the Asset Purchase Agreement that was presentedin the Sale Order.(2) Balance sheet has been presented on a non-consolidated basis for the Debtor. The balance sheet containsmanagement's best estimates regarding the amounts reflecting assets and liabilities.(3) Accounts payable balance reflects the estate's estimate of pre- and post-petition payables, less the post-petitionpayables assumed by the Purchaser; the balance does not reflect agreements made between the Purchaserand creditors regarding assumed executory contracts.(4) It is the estate's estimate that income taxes payable are $0; certain taxing entities have asserted claims for other taxes against the estate, which the estate is in the process of reconciling.(5) Junior term loan remains outstanding on the estate's balance sheet.(6) Final year-end 2020 GAAP tax provision has not yet been finalized. It is the estate's estimate that the deferred taxes amount listed in the long term liabilities section will change materially.(7) Deferred rent balance does not reflect agreements made between the Purchaser and creditors regarding assumed leases.(8) Balance sheet reflects adjusted retained earnings balance to account for transfer of assets to the Purchaser. 2



August2021

INCOME STATEMENT(1)

Gross Revenue –Cost of Goods Sold –Gross Profit –

Operating ExpensesSG&A ($20,000)Depreciation & Amortization –Operating Income/(Loss) ($20,000)Other Income & Expenses(2) (676,871)Income/(Loss) Before Taxes ($696,871)

Income Tax Benefit/(Expense) –

Net Income/(Loss) ($696,871)

Notes:(1) Income statement is presented on a non-consolidated basis(2) Other Income & Expenses includes estimated accrued professional fees andUS Trustee fees

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Schedule of Cash Receipts and DisbursementsFor the Period From August 1, 2021 to August 28, 2021

August2021

I. Schedule of Cash Receipts and Disbursements1.) Total Receipts –

Operating Disbursements2.) AP - Merchandise –3.) AP - Non-Merchandise –4.) Payroll (20,000)5.) Rent & Utilities –6.) Sales Tax –7.) Credit Card Fees –8.) Miscellaneous Fees (424)9.) Total Operating Disbursements ($20,424)

Non-Operating Disbursements

Restructuring Items `10.) Professional Fees ($845,000)11.) US Trustee Fees (250,250)12.) Critical Vendor Payments –13.) Management Incentive –14.) Deferred Administrative Rent –15.) Cash Management Reserve –16.) Total Restructuring Items ($1,095,250)

Financing:17.) Interest –18.) Total Financing Items –

19.) Non Operating Disbursements ($1,095,250)

20.) Total Disbursements ($1,115,674)

21.) Net Cash Flow ($1,115,674)

II. Disbursement by Debtor22.) Paper Source, Inc. ($1,115,674)23.) Total Disbursements ($1,115,674)

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ACCOUNTS RECEIVABLE AGING(1)

1. Current –2. 0-30 –3. 31-60 –4. 61+ –5. TOTAL ACCOUNTS RECEIVABLE –6. AMOUNT CONSIDERED UNCOLLECTIBLE –7. ACCOUNTS RECEIVABLE (NET) –

AGING OF POSTPETITION TAXES AND PAYABLES(2)

0-30 31-60 61-90 91+TAXES PAYABLE DAYS DAYS DAYS DAYS TOTAL1. TOTAL TAXES PAYABLE – – – – –2. ACCOUNTS PAYABLE – – – – –

STATUS OF POSTPETITION TAXESBEGINNING AMOUNT ENDINGTAX WITHHELD AND/AMOUNT TAX

FEDERAL LIABILITY OR ACCRUED PAID LIABILITY1. WITHHOLDING – – – –2. FICA-EMPLOYEE – – – –3. FICA-EMPLOYER – – – –4. UNEMPLOYMENT – – – –5. INCOME – – – –6. OTHER – – – –7. TOTAL FEDERAL TAXES – – – –STATE AND LOCAL8. WITHHOLDING – – – –9. SALES – – – –10. EXCISE – – – –11. UNEMPLOYMENT – – – –12. REAL PROPERTY – – – –13. PERSONAL PROPERTY – – – –14. OTHER – – – –15. TOTAL STATE & LOCAL – – – –16. TOTAL TAXES – – – –Notes:(1) Accounts Receivable is aged based on due date per agreed upon customer terms and were assumed by the Purchaser, as

defined in the Asset Purchase Agreement that was presented in the Sale Order, as part of the sale transaction.(2) Postpetition taxes and payables were assumed by the Purchaser as part of the sale transaction.(3) Accounts Payable is aged based on due date per agreed upon vendor terms. 5



Case number Debtor NameName of Institution (bank

or brokerage firm)Type of Account

Last 4 digits of account number

Amount as of Petition Date

3/2/2021Amount as of

8/1/2021Amount as of

8/28/202121-30660 Paper Source, Inc. Citizens Bank Checking 8700 – $4,034,835 –21-30660 Paper Source, Inc. Citizens Bank Checking 9864 – – $2,919,16121-30660 Paper Source, Inc. Fifth Third Bank Checking 9791 – – –

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Total Payments to Insiders(1)

Amount Cumulative Type of Paid in Payments

Name Role / Capacity Payments Current Period(2) Since FilingMatt Kahn Director Salary $20,000 $90,000Winnie Park Chief Executive Officer Salary, KEIP – 453,077Ron Kruczynski Chief Financial Officer Salary, KEIP – 277,885Jenica Myszkowski Chief of Operations Salary, KEIP – 230,769Karima Ridgley Chief Marketing & Digital Commerce Officer Salary, KEIP – 163,692Patrick Priore Chief Merchant Officer Salary, KEIP – 180,769

Total $20,000 $1,396,192

Notes:(1) The listing of a party as an insider for purposes of the MOR is not intended to be, nor should it be, construed as an admission of any fact, right, claim, or defense, and all such rights, claims, and defenses are hereby expressly reserved. Persons listed as “insiders” have been included for informational purposes only.(2) Payments to Insiders include salary and expense reimbursements (if any). Payroll is reported on a gross basis, and does not include taxwithholdings, benefits, or other deductions that would reduce the payment amount to employees.

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Total Disbursements to Professionals(1)

CumulativeAugust Payments

Name Role of Professional Payments Since FilingWillkie, Farr & Gallagher LLP Debtor Counsel $127,925.11 $2,153,172.34Whiteford ,Taylor & Preston LLP Debtor Counsel $37,760.80 $274,632.59SSG Capital Advisors, LLC(2) Debtor Investment Banker – $3,305,212.84M-III Advisory Partners, LP Debtor Financial Advisor $138,643.72 $1,406,557.00Epiq Corporate Restructuring, LLC Claims Agent $44,138.65 $348,436.83A&G Realty Partners LLC Debtor Real Estate Advisor $481,304.74 $1,650,000.00Hahn & Hessen LLP UCC Counsel – –Province, LLC UCC Financial Advisor – $307,982.52Hirschler Fleischer, P.C. UCC Local Counsel – $27,993.50Proskauer Rose LLP Lender Counsel – $2,451,669.14Carl Marks Advisors Lender Financial Advisor – $720,167.05

Total $829,773.02 $12,645,823.81

Notes:(1) The Debtors have incurred additional professional fees than those presented above. Professionalfees incurred but not paid over the period have been transferred to the Carve-Out Reserveaccount maintained by the Debtors, pursuant to the Final Order (A) Authorizing the Debtors to Obtain Postpetition Financing, (B) Authorizing the Debtors to Use Cash Collateral, (C) Granting Liens and ProvidingSuperpriority Administrative Expense Status, (D) Granting Adequate Protection to the Prepetition Secured Parties,(E) Modifying The Automatic Stay, (F) Granting Related Relief [Docket No. 309]. `(2) SSG Capital Advisors, LLC's success fee, received in connection with the sale of Purchased Assets to the Purchaser, is being held in a segregated account and is subject to court approval.

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Post-Petition Status of DIP Financing, Leases Payable and Adequate Protection Payments(1)

Scheduled Amounts TotalName of Monthly Paid UnpaidCreditor Payment Due Description During Month Post-PetitionMidCap Financial Trust N/A DIP Financing Principal – –MidCap Financial Trust N/A DIP Financing Interest – –Utilities - Adequate Assurance N/A Utility Deposit – –

Total – –

Notes:(1) All of the Debtor's outstanding obligations under the DIP Financing Facility were satisfied upon closing of the sale ofsubstantially all of the Debtor's assets on May 27, 2021.

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Documents

UST Form 11-MOR