Avadel Pharmaceuticals Plc Initial financial statements for the period from 1 December 2015 (date of Incorporation) to 31 December 2016 AVADEL PHARMACEUTICALS PLC INITIAL FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FRO

Avadel Pharmaceuticals Plc

Initial financial statements

for the period from 1 December 2015 (date of Incorporation) to

AVADEL PHARMACEUTICALS PLC

INITIAL FINANCIAL STATEMENTS

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

AVADEL PHARMACEUTICALS PLC

INTITAL FINANCIAL STATEMENTS

AVADEL PHARMACEUTICALS PLC

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Irish company law requires the directors to prepare initial financial statements when a distribution or share buyback is proposed to be declared or carried out during the company's first financial year or before the financial statements are laid before the annual general meeting of the company in respect of that financial year. Accordingly, the directors are required to prepare initial financial statements for the period from 1 December 2015 (date of incorporation). Initial financial statements must be properly prepared that give a true and fair view subject only to matters which are not material for purposes of determining whether the proposed dividend or share buyback would contravene Irish company law by reference to the profits, losses, assets and liabilities, provisions, share capital and reserves including distributable reserves dealt with in the initial financial statements. Under that law the directors have elected to prepare the financial statements in accordance with the relevant financial reporting framework, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

In preparing these financial statements, the directors are required to:

The directors confirm that they have complied with the above requirements in preparing the initial financial statements.

The directors are responsible for ensuring that the company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the company, enable at any time the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy, enable them to ensure that the initial financial statements are properly prepared in accordance with the provisions of Part 6 of the Companies Act 2014 (the "Act") subject only to matters mentioned in section 1083(6)(a) of the Act. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS OF AVADEL PHARMACEUTICALS

PLC PURSUANT TO SECTION 1083(6)(b) OF THE COMPANIES ACT 2014

We have examined the initial financial statements of Avadel Pharmaceuticals Plc for the period from 1 December 2015 (date of incorporation) to 31 December 2016 which comprise the Statement of Comprehensive Income, Statement of changes in Equity, the Statement of Financial Position, Statement of Cashflows and the related notes 1 to 17. These initial financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the company's directors in accordance with Section 1083(6)(b) of the Act. Our audit work has been undertaken so that we might state to the company's directors those matters we are required to state in an auditors' report on initial financial statements and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company's directors, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As described in the Statement of Directors' Responsibilities, the directors are responsible for preparing the initial financial statements in accordance with the applicable Irish law and the relevant financial reporting framework, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

Our responsibility is to report to you our opinion as to whether the initial financial statements have been properly prepared within the meaning of section 1083(8) of the Companies Act 2014.

In our opinion the initial financial statements for the period from 1 December 2015 (date of incorporation) to 31 December 2016 have been properly prepared within the meaning of Section 1083(8) of the Companies Act 2014.

Chartered Accountants and Statutory Audit Firm

Member of Deloitte Touche Tohmatsu

AVADEL PHARMACEUTICALS PLC

STATEMENT OF COMPREHENSIVE INCOME (Amounts in $ Thousands)

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

The Company did not trade during the financial period and received no income and incurred no expenditure. Consequently, during the current financial period the company made neither a profit nor a loss.

AVADEL PHARMACEUTICALS PLC

STATEMENT OF CHANGES IN EQUITY (Amounts in $ Thousands)

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

This reserve records the excess of the fair value of the consideration receivable for issued shares above the nominal value of shares issued.

These reserves comprise the merger reserves arising on cross border merger

AVADEL PHARMACEUTICALS PLC

STATEMENT OF FINANCIAL POSITION (Amounts in $ thousands)

The initial financial statements were approved by the board on May 5, 2017 and signed on its behalf by:

Michael S. Anderson Craig R. Stapleton

/s/ Michael S. Anderson /s/ Craig R. Stapleton

AVADEL PHARMACEUTICALS PLC

STATEMENT OF CASHFLOWS

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

AVADEL PHARMACEUTICALS PLC

NOTES TO THE INITIAL FINANCIAL STATEMENTS

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

Basis of preparation

The initial financial statements of Avadel Pharmaceuticals Plc have been prepared in contemplation of a proposed distribution, as required by Section 1083 of the Act. The initial financial statements are presented as of and for the period from 1 December 2015 (date of incorporation) to 31 December 2016.

The initial financial statements have been prepared on a going concern basis and in accordance with the provisions of Section 1083 of the Act and Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council, subject only to matters which are not material for the purpose of determining whether the proposed distribution would contravene company law by reference to the profits, losses, assets and liabilities, provisions, share capital and reserves including distributable reserves dealt with in the initial financial statements.

As detailed in note 17, post statement of financial position events, on 6 March 2017 the Irish High Court approved the conversion of $317,254 of the company's share premium to distributable reserves.

The initial financial statements of the company present the profit and loss account, statement of financial position, statement of changes in equity and statement of cash flows on a stand-alone basis. These are not the statutory financial statements of the company, which will be laid before the next Annual General Meeting.

The principal accounting policies are summarised below. They have all been applied consistently throughout the period.

General Information and Basis of Accounting

Avadel Pharmaceuticals plc was incorporated on December 1, 2015 as an Irish private limited company, and re-registered as an Irish public limited company, or plc, on November 21, 2016. Its principal place of business is located at Block 10-1, Blanchardstown Corporate Park, Ballycoolin, Dublin 15, Ireland. Its website is www.Avadel.com.

The Company is the successor to Flamel Technologies S.A., a French soci t anonyme ("Flamel"), as the result of the merger of Flamel with and into the company which was completed at 11:59:59 p.m., Central Europe Time, on December 31, 2016 (the "Merger") pursuant to the agreement between Flamel and Avadel entitled Common Draft Terms of Cross-Border Merger dated as of June 29, 2016. Immediately prior to the merger, the Company was a wholly owned subsidiary of Flamel. In accordance with the merger agreement, Flamel ceased to exist as a separate entity and the company continued as the surviving entity and assumed all of the assets and liabilities of Flamel. These assets and liabilities were valued using the book value of the assets and liabilities at the time of the merger.

The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council, and promulgated for use in Ireland by Chartered Accountants Ireland.

The functional currency of the Company is considered to be US dollar because that is the currency of the primary economic environment in which the company operates.

AVADEL PHARMACEUTICALS PLC

NOTES TO THE INITIAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

The company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review which forms part of the directors' report. The directors' report also describes the financial position of the company, the company's objectives, policies and processes for managing its capital, its financial risk management objectives and details of its financial instruments and its exposure to credit risk and liquidity risk.

The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the initial financial statements.

Tangible fixed assets

Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, other than investment properties and freehold land, at rates calculated to write off the cost or valuation, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows:

Fixtures, fittings & equipment 10 years

Computer equipment 3 years

Residual value represents the estimated amount which would currently be obtained from disposal of an asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

Investments in Subsidiary

The company's investment in subsidiaries are initially recorded at fair value of consideration given plus any directly attributable costs. The investments are tested for impairment if circumstances or indicators suggest that impairment may exist.

Financial instruments

Financial Assets & Liabilities (including Investment in Subsidiary Undertakings)

All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a finance transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Non-current debt instruments which meet the following conditions are subsequently measured at amortised cost using the effective interest method:

(a) Returns to the holder are (i) a fixed amount; or (ii) a fixed rate of return over the life of the instrument; or (iii) a variable return that, throughout the life of the instrument, is equal to a single referenced quoted or observable interest rate; or (iv) some combination of such fixed rate and variable rates, providing that both rates are positive.

(b) There is no contractual provision that could, by its terms, result in the holder losing the principal amount or any interest attributable to the current period or prior periods.

AVADEL PHARMACEUTICALS PLC

NOTES TO THE INITIAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016

(c) Contractual provisions that permit the issuer to prepay a debt instrument or permit the holder to put it back to the issuer before maturity are not contingent on future events, other than to protect the holder against the credit deterioration of the issuer or a change in control of the issuer, or to protect the holder or issuer against changes in relevant taxation or law.

(d) There are no conditional returns or repayment provisions except for the variable rate return described in (a) and prepayment provisions described in (c).

Debt instruments that are classified as payable or receivable within one year and which meet the above conditions are measured at the undiscounted amount of the cash or other consideration expected to be paid or received, net of impairment.

Other debt instruments not meeting these conditions are measured at fair value through profit or loss.

Financial assets are derecognised when and only when

a) the contractual rights to the cash flows from the financial asset expire or are settled,

b) the Company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or

c) the Company, despite having retained some significant risks and rewards of ownership, has transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer.

Fair value measurement

The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the market is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, an entity estimates the fair value by using a valuation technique.

Stocks are stated at the lower of cost and estimated selling price less costs to sell, which is equivalent to the net realisable value. Cost includes materials, direct labour and a proportion of manufacturing overheads based on normal levels of activity. Cost is calculated using the FIFO (first-in, first-out) method. Provision is made for obsolete, slow-moving or defective items where appropriate.

Impairment of Assets

Assets, other than those measured at fair value, are assessed for indicators of impairment at each statement of financial position date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below.

Non-financial assets

An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.

AVADEL PHARMACEUTICALS PLC

NOTES TO THE INITIAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE FINANCIAL PERIOD FROM 1 DECEMBER 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2016