UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number: 000-28508

———————

AVADEL PHARMACEUTICALS PLC

(Exact name of registrant as specified in its charter)

———————


Ireland	000-28508	98-1341933
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

10 Earlsfort Terrace

Dublin 2 ~~Ireland~~

D02 T380

Ireland

(Address of Principal Executive Office and Zip Code)

+353-1-901-5201

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

———————

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares*	AVDL	The Nasdaq Global Market
Ordinary Shares, nominal value $0.01 per share**	N/A

*American Depositary Shares may be evidenced by American Depositary Receipts. Each American Depositary Share represents one (1) Ordinary Share.

** Not for trading, but only in connection with the listing of American Depositary Shares on The Nasdaq Global Market.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	þ
Non-accelerated	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

At ~~November~~May 4, ~~2021, 58,620,088~~2022, 59,038,237 ordinary shares, nominal value $0.01 each, of the Company were outstanding.

TABLE OF CONTENTS

NOTE REGARDING TRADEMARKS

We own various trademark registrations and applications, and unregistered trademarks, including ~~Avadel™~~Avadel®, ~~Micropump™~~Micropump®, ~~LiquiTime™~~LiquiTime® and~~Medusa™~~ Medusa®. All other trade names, trademarks and service marks of other companies appearing in this Quarterly Report are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Quarterly Report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

From time to time, we may use our website, ~~our~~ LinkedIn or our Twitter account (@AvadelPharma) to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.avadel.com. Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website, our LinkedIn ~~account~~posts or our Twitter posts are not incorporated into, and does not form a part of, this Quarterly Report.

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Cautionary Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but are not always, made through the use of words or phrases such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue,” and similar expressions, or the negative of these terms, or similar expressions. Accordingly, these statements involve estimates, assumptions, risks and uncertainties which could cause actual results to differ materially from those expressed in them.

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•Our reliance on a single lead product candidate, ~~FT218, the timing of and our ability to obtain regulatory approval, if at all;~~FT218;

•Our ability to obtain ~~desired~~ regulatory ~~exclusivity for FT218, including orphan drug exclusivity;~~

•~~Our ability to~~approval of and successfully commercialize FT218, including any delays in ~~a timely manner or at all, if approved;~~approval;

•The ability of FT218, if approved, ~~and launched commercially,~~ to gain market acceptance;

•Our ability to enter into strategic partnerships for the commercialization, manufacturing and distribution of FT218, if approved;

•Our dependence on a ~~single manufacturer~~limited number of suppliers for the manufacturing of ~~our lead product candidate~~FT218 and ~~a single supplier for~~ certain raw materials used in ~~our lead product candidate~~FT218 and any failure of such ~~third party~~ suppliers ~~to either manufacture our product candidate in a timely manner or~~ to deliver sufficient quantities of these raw materials, which could have a material adverse effect on our business;

•Our ability to finance our operations on acceptable terms, either through the raising of capital, the incurrence of convertible or other indebtedness or through strategic financing or commercialization partnerships;

•Our expectations about the potential market size and market participation for ~~our lead product candidate, if approved and commercialized;~~

•~~Our expectations about pending and potential future patent infringement claims against us;~~

•Any further restructuring actions that may be required and our ability to obtain any required consents (including any consents required pursuant to the Indenture governing our exchange notes due 2023, or the 2023 Notes);FT218;

•Our ability to continue to service our Exchangeable Senior Notes due February 2023 (the “February 2023 Notes”) and our Exchangeable Senior Notes due October 2023 (the “October 2023 Notes”, together with the February 2023 Notes, the “2023 Notes”), including making the ongoing interest payments on the 2023 Notes, settling exchanges of the 2023 Notes in cash or completing any required repurchases of the 2023 Notes;

•The potential impact of COVID-19 on our business and future operating results;

•Our ability to hire and retain key members of our ~~management~~leadership team and ~~our employees;~~other personnel; and

•Competition existing today or that will likely arise in the future.

These forward-looking statements are neither promises nor guarantees of future performance due to a variety of risks and uncertainties and other factors more fully discussed in the “Risk Factors” section in Part I, Item 1A of the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~9, 2021~~16, 2022 and the risk factors and cautionary statements described in other documents that we file from time to time with the SEC. Given these uncertainties, readers should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to revise any forward-looking statements to reflect events or developments occurring after the date of this Quarterly Report, even if new information becomes available in the future.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF ~~(LOSS) INCOME~~LOSS

(In thousands, except per share data)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Product sales $ — $ — $ — $ 22,334
Operating expenses:
Cost of products — — — 5,742
Research and development expenses 4,380 5,569 14,994 15,156
Selling, general and administrative expenses 21,283 8,423 47,469 23,431
Intangible asset amortization — — — 406
Changes in fair value of contingent consideration — (69) — 3,327
Gain on sale of Hospital Products — — — (45,760)
Restructuring income — (226) (53) (43)
Total operating expense 25,663 13,697 62,410 2,259
Operating (loss) income (25,663) (13,697) (62,410) 20,075
Investment and other income (expense), net 489 213 1,531 (906)
Interest expense (1,929) (3,259) (5,788) (9,686)
Gain from release of certain liabilities — — 166 —
Other expense - changes in fair value of contingent consideration payable — — — (435)
(Loss) income before income taxes (27,103) (16,743) (66,501) 9,048
Income tax benefit (5,101) (5,040) (11,473) (9,258)
Net (loss) income $ (22,002) $ (11,703) $ (55,028) $ 18,306
Net (loss) income per share - basic $ (0.38) $ (0.20) $ (0.94) $ 0.36
Net (loss) income per share - diluted (0.38) (0.20) (0.94) 0.35
Weighted average number of shares outstanding - basic 58,585 58,213 58,506 51,206
Weighted average number of shares outstanding - diluted 58,585 58,213 58,506 52,849


	Three Months Ended March 31,
		2022		2021


Operating expenses:

Research and development expenses		$	6,991	$	3,852
Selling, general and administrative expenses		21,635		11,012
Restructuring income		—		(53)
Total operating expense		28,626		14,811
Operating loss		(28,626)		(14,811)
Investment and other (expense) income, net		(137)		610
Interest expense		(2,017)		(1,929)
Gain from release of certain liabilities		33		78
Loss before income taxes		(30,747)		(16,052)
Income tax benefit		(4,323)		(2,607)
Net loss		$	(26,424)	$	(13,445)

Net loss per share - basic		$	(0.45)	$	(0.23)
Net loss per share - diluted		(0.45)		(0.23)

Weighted average number of shares outstanding - basic		58,824		58,443
Weighted average number of shares outstanding - diluted		58,824		58,443

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(In thousands)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net (loss) income $ (22,002) $ (11,703) $ (55,028) $ 18,306
Other comprehensive (loss) income, net of tax:
Foreign currency translation (loss) income (237) 534 (839) 539
Net other comprehensive (loss) income, net of income tax (benefit) provision of $(59), $1, $(220) and $131, respectively (157) 66 (854) 349
Total other comprehensive (loss) income, net of tax (394) 600 (1,693) 888
Total comprehensive (loss) income $ (22,396) $ (11,103) $ (56,721) $ 19,194


	Three Months Ended March 31,
		2022		2021

Net loss		$	(26,424)	$	(13,445)
Other comprehensive loss, net of tax:
Foreign currency translation loss		(185)		(718)
Net other comprehensive loss, net of income tax benefit (expense) of $330 and $(55), respectively		(917)		(537)
Total other comprehensive loss, net of tax		(1,102)		(1,255)
Total comprehensive loss		$	(27,526)	$	(14,700)

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	58,169	$	71,722	Cash and cash equivalents	$	60,873	$	50,708
Marketable securities	Marketable securities	122,924		149,680		Marketable securities	62,608		106,513

Research and development tax credit receivable	Research and development tax credit receivable	2,493		3,326		Research and development tax credit receivable	2,387		2,443
Prepaid expenses and other current assets	Prepaid expenses and other current assets	22,234		38,726		Prepaid expenses and other current assets	34,873		32,826
Total current assets	Total current assets	205,820		263,454		Total current assets	160,741		192,490
Property and equipment, net	Property and equipment, net	304		359		Property and equipment, net	268		285
Operating lease right-of-use assets	Operating lease right-of-use assets	2,070		2,604		Operating lease right-of-use assets	2,410		2,652
Goodwill	Goodwill	16,836		16,836		Goodwill	16,836		16,836

Research and development tax credit receivable	Research and development tax credit receivable	961		3,445		Research and development tax credit receivable	1,237		1,225
Other non-current assets	Other non-current assets	38,098		24,939		Other non-current assets	39,635		33,777
Total assets	Total assets	$	264,089	$	311,637	Total assets	$	221,127	$	247,265

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Current portion of long-term debt						Current portion of long-term debt	$	26,184	$	—
Current portion of operating lease liability	Current portion of operating lease liability	$	504	$	474	Current portion of operating lease liability	917		900
Accounts payable	Accounts payable	6,874		2,934		Accounts payable	6,048		7,679
Accrued expenses	Accrued expenses	8,738		6,501		Accrued expenses	9,432		7,151

Other current liabilities	Other current liabilities	1,471		5,200		Other current liabilities	1,442		5,270
Total current liabilities	Total current liabilities	17,587		15,109		Total current liabilities	44,023		21,000
Long-term debt	Long-term debt	142,086		128,210		Long-term debt	116,525		142,397

Long-term operating lease liability	Long-term operating lease liability	1,460		1,840		Long-term operating lease liability	1,500		1,707
Other non-current liabilities	Other non-current liabilities	3,999		4,212		Other non-current liabilities	3,847		3,917
Total liabilities	Total liabilities	165,132		149,371		Total liabilities	165,895		169,021

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; 488 issued and outstanding at September 30, 2021 and 488 issued and outstanding at December 31, 2020, respectively		5		5
Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 58,616 issued and outstanding at September 30, 2021 and 58,396 issued and outstanding at December 31, 2020		586		583
Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; 488 issued and outstanding at March 31, 2022 and 488 issued and outstanding at December 31, 2021, respectively						Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; 488 issued and outstanding at March 31, 2022 and 488 issued and outstanding at December 31, 2021, respectively	5		5
Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 59,032 issued and outstanding at March 31, 2022 and 58,620 issued and outstanding at December 31, 2021						Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 59,032 issued and outstanding at March 31, 2022 and 58,620 issued and outstanding at December 31, 2021	590		586
Additional paid-in capital	Additional paid-in capital	546,565		566,916		Additional paid-in capital	553,859		549,349
Accumulated deficit	Accumulated deficit	(425,455)		(384,187)		Accumulated deficit	(474,180)		(447,756)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(22,744)		(21,051)		Accumulated other comprehensive loss	(25,042)		(23,940)
Total shareholders’ equity	Total shareholders’ equity	98,957		162,266		Total shareholders’ equity	55,232		78,244
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	264,089	$	311,637	Total liabilities and shareholders’ equity	$	221,127	$	247,265

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

~~(unaudited)~~(Unaudited)

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022


		Ordinary shares			Preferred shares			Additional		Accumulated		Accumulated other comprehensive		Total shareholders’			Ordinary shares			Preferred shares			Additional		Accumulated		Accumulated other comprehensive		Total shareholders’
		Shares	Amount		Shares	Amount		paid-in capital		deficit		loss		equity			Shares	Amount		Shares	Amount		paid-in capital		deficit		loss		equity
Balance, December 31, 2020		58,396	$	583	488	$	5	$	566,916	$	(384,187)	$	(21,051)	$	162,266
Impact of the adoption of ASU 2020-06		—	—		—	—		(26,699)		13,760		—		(12,939)
Balance, December 31, 2021																Balance, December 31, 2021	58,620	$	586	488	$	5	$	549,349	$	(447,756)	$	(23,940)	$	78,244
Net loss	Net loss	—	—		—	—		—		(13,445)		—		(13,445)		Net loss	—	—		—	—		—		(26,424)		—		(26,424)
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		—		(1,255)		(1,255)		Other comprehensive loss	—	—		—	—		—		—		(1,102)		(1,102)
Exercise of stock options	Exercise of stock options	23	—		—	—		106		—		—		106		Exercise of stock options	275	3		—	—		1,903		—		—		1,906
Vesting of restricted shares	Vesting of restricted shares	61	1		—	—		(1)		—		—		—		Vesting of restricted shares	119	1		—	—		(1)		—		—		—
Employee share purchase plan share issuance	Employee share purchase plan share issuance	8	—		—	—		43		—		—		43		Employee share purchase plan share issuance	18	—		—	—		103		—		—		103
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		1,728		—		—		1,728		Stock-based compensation expense	—	—		—	—		2,505		—		—		2,505
Balance, March 31, 2021		58,488	$	584	488	$	5	$	542,093	$	(383,872)	$	(22,306)	$	136,504
Net loss		—	—		—	—		—		(19,581)		—		(19,581)
Other comprehensive loss		—	—		—	—		—		—		(44)		(44)
Stock-based compensation expense		—	—		—	—		2,001		—		—		2,001
Balance, June 30, 2021		58,488	$	584	488	$	5	$	544,094	$	(403,453)	$	(22,350)	$	118,880
Net loss		—	—		—	—		—		(22,002)		—		(22,002)
Other comprehensive loss		—	—		—	—		—		—		(394)		(394)
Exercise of stock options		25	1		—	—		62		—		—		63
Vesting of restricted shares		94	1		—	—		(1)		—		—		—
Employee share purchase plan share issuance		9	—		—	—		51		—		—		51
Stock-based compensation expense		—	—		—	—		2,359		—		—		2,359
Balance, September 30, 2021		58,616	$	586	488	$	5	$	546,565	$	(425,455)	$	(22,744)	$	98,957
Balance, March 31, 2022																Balance, March 31, 2022	59,032	$	590	488	$	5	$	553,859	$	(474,180)	$	(25,042)	$	55,232

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

~~(unaudited)~~(Unaudited)

~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021

Ordinary shares Preferred shares Additional paid-in Accumulated Accumulated
other
comprehensive Treasury shares Total
shareholders’ (deficit)
Shares Amount Shares Amount capital deficit loss Shares Amount equity
Balance, December 31, 2019 42,927 $ 429 — $ — $ 434,391 $ (391,215) $ (22,806) 5,407 $ (49,998) $ (29,199)
Net loss — — — — — (865) — — — (865)
Other comprehensive loss — — — — — — (821) — — (821)
Exercise of stock options 146 2 — — 1,387 — — — — 1,389
February 2020 private placement 8,680 87 488 5 60,641 — — — — 60,733
Vesting of restricted shares 19 — — — — — — — — —
Employee share purchase plan share issuance 40 — — — 88 — — — — 88
Stock-based compensation expense — — — — 742 — — — — 742
Balance, March 31, 2020 51,812 $ 518 488 $ 5 $ 497,249 $ (392,080) $ (23,627) 5,407 $ (49,998) $ 32,067
Net income — — — — — 30,874 — — — 30,874
Other comprehensive income — — — — — — 1,109 — — 1,109
Exercise of stock options 95 1 — — 392 — — — — 393
February 2020 private placement — — — — (94) — — — — (94)
May 2020 public offering 11,630 116 — — 116,858 — — — — 116,974
Employee share purchase plan share issuance — — — — 33 — — — — 33
Stock-based compensation expense — — — — 769 — — — — 769
Balance, June 30, 2020 63,537 $ 635 488 $ 5 $ 615,207 $ (361,206) $ (22,518) 5,407 $ (49,998) $ 182,125
Net loss — — — — — (11,703) — — — (11,703)
Other comprehensive income — — — — — — 600 — — 600
Exercise of Stock Options 22 — — — 47 — — — — 47
February 2020 private placement — — — — (69) — — — — (69)
May 2020 public offering — — — — (50) — — — — (50)
Vesting of restricted shares 82 1 — — (1) — — — — —
Employee share purchase plan share issuance 9 — — — 56 — — — — 56
Stock-based compensation expense — — — — 194 — — — — 194
Retirement of treasury shares (5,407) (54) — — (49,944) — — (5,407) 49,998 —
Balance, September 30, 2020 58,243 $ 582 488 $ 5 $ 565,440 $ (372,909) $ (21,918) — $ — $ 171,200


	Ordinary shares			Preferred shares			Additional paid-in		Accumulated		Accumulated other comprehensive		Total shareholders’
	Shares	Amount		Shares	Amount		capital		deficit		loss		equity
Balance, December 31, 2020	58,396	$	583	488	$	5	$	566,916	$	(384,187)	$	(21,051)	$	162,266
Impact of the adoption of ASU 2020-06	—	—		—	—		(26,699)		13,760		—		(12,939)
Net loss	—	—		—	—		—		(13,445)		—		(13,445)
Other comprehensive loss	—	—		—	—		—		—		(1,255)		(1,255)
Exercise of stock options	23	—		—	—		106		—		—		106
Vesting of restricted shares	61	1		—	—		(1)		—		—		—
Employee share purchase plan share issuance	8	—		—	—		43		—		—		43
Stock-based compensation expense	—	—		—	—		1,728		—		—		1,728
Balance, March 31, 2021	58,488	$	584	488	$	5	$	542,093	$	(383,872)	$	(22,306)	$	136,504

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(55,028)	$	18,306
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net loss						Net loss	$	(26,424)	$	(13,445)
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	614		1,297		Depreciation and amortization	259		218
Remeasurement of acquisition-related contingent consideration		—		3,327
Remeasurement of financing-related contingent consideration		—		435
Amortization of debt discount and debt issuance costs	Amortization of debt discount and debt issuance costs	937		4,835		Amortization of debt discount and debt issuance costs	312		312
Change in deferred taxes	Change in deferred taxes	(11,322)		(4,582)		Change in deferred taxes	(4,323)		(2,534)
Stock-based compensation expense	Stock-based compensation expense	6,088		1,705		Stock-based compensation expense	2,505		1,728
Gain from the disposition of the hospital products		—		(45,760)
Gain from the release of certain liabilities		(166)		—
Gain from release of certain liabilities						Gain from release of certain liabilities	(33)		(78)
Other adjustments	Other adjustments	1,056		306		Other adjustments	702		561
Net changes in assets and liabilities	Net changes in assets and liabilities					Net changes in assets and liabilities
Accounts receivable		—		8,281
Inventories		—		(1,352)

Prepaid expenses and other current assets	Prepaid expenses and other current assets	(54)		1,759		Prepaid expenses and other current assets	(2,058)		(3,736)
Research and development tax credit receivable	Research and development tax credit receivable	3,079		2,036		Research and development tax credit receivable	(19)		80
Accounts payable & other current liabilities	Accounts payable & other current liabilities	(201)		(4,051)		Accounts payable & other current liabilities	(5,613)		(3,789)
Accrued expenses	Accrued expenses	2,421		(6,625)		Accrued expenses	2,314		(2,112)

Earn-out payments for contingent consideration in excess of acquisition-date fair value		—		(5,323)
Royalty payments for contingent consideration payable in excess of original fair value		—		(866)
Other assets and liabilities	Other assets and liabilities	(2,228)		(3,337)		Other assets and liabilities	(1,667)		(618)
Net cash used in operating activities	Net cash used in operating activities	(54,804)		(29,609)		Net cash used in operating activities	(34,045)		(23,413)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(26)		(33)		Purchases of property and equipment	—		(26)

Proceeds from the disposition of the hospital products	Proceeds from the disposition of the hospital products	16,500		17,250		Proceeds from the disposition of the hospital products	—		8,250
Proceeds from sales of marketable securities	Proceeds from sales of marketable securities	83,726		30,075		Proceeds from sales of marketable securities	44,341		40,736
Purchases of marketable securities	Purchases of marketable securities	(58,591)		(124,254)		Purchases of marketable securities	(2,090)		(37,769)
Net cash provided by (used in) investing activities		41,609		(76,962)
Net cash provided by investing activities						Net cash provided by investing activities	42,251		11,191

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from the February 2020 private placement		—		60,570
Proceeds from the May 2020 public offering		—		116,924
Proceeds from stock option exercises and employee stock purchase plan		263		2,006

Proceeds from stock option exercises and employee share purchase plan						Proceeds from stock option exercises and employee share purchase plan	2,009		149
Net cash provided by financing activities	Net cash provided by financing activities	263		179,500		Net cash provided by financing activities	2,009		149

Effect of foreign currency exchange rate changes on cash and cash equivalents	Effect of foreign currency exchange rate changes on cash and cash equivalents	(621)		406		Effect of foreign currency exchange rate changes on cash and cash equivalents	(50)		(477)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	(13,553)		73,335		Net change in cash and cash equivalents	10,165		(12,550)
Cash and cash equivalents at January 1,	Cash and cash equivalents at January 1,	71,722		9,774		Cash and cash equivalents at January 1,	50,708		71,722
Cash and cash equivalents at September 30,		$	58,169	$	83,109
Cash and cash equivalents at March 31,						Cash and cash equivalents at March 31,	$	60,873	$	59,172

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Interest paid	Interest paid	$	6,469	$	6,469	Interest paid	$	5,531	$	3,234
Income taxes paid (refund)		$	68	$	(1,788)
Income taxes paid						Income taxes paid	$	—	$	—

See accompanying notes to unaudited condensed consolidated financial statements

- 9 -

AVADEL PHARMACEUTICALS PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

NOTE 1: Summary of Significant Accounting Policies

Nature of Operations. Avadel Pharmaceuticals plc (Nasdaq: AVDL) (“Avadel,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company. ~~We are~~The Company is registered as an Irish public limited company. ~~Our~~The Company’s headquarters are in Dublin, Ireland ~~and we have~~with operations in Dublin, Ireland and St. Louis, Missouri, United ~~States.~~States (“U.S.”).

~~Our~~The Company’s lead product candidate, FT218, is an investigational once-nightly, extended-release formulation of sodium oxybate for the treatment of excessive daytime sleepiness (“EDS”) ~~and~~or cataplexy in adults with narcolepsy. ~~We are~~The Company is primarily focused on the development and potential United States (“U.S.”) Food and Drug Administration (“FDA”) approval of FT218. In December 2020, wethe Company submitted a New Drug Application (“NDA”) to the FDA for FT218 to treat excessive daytime sleepiness ~~and~~or cataplexy in adults with narcolepsy. In February 2021, the NDA for FT218 was accepted by the FDA and was assigned a Prescription Drug User Fee Act (“PDUFA”) target action date of October 15, 2021. On October 15, 2021, wethe Company announced that the FDA informed usAvadel that the review of ~~our~~the NDA for FT218 was ongoing beyond its previously assigned target action date. As of the date of this Quarterly Report, the FDA’s review of the Company’s NDA for FT218 remains ongoing.

Outside of ~~our~~the Company’s lead product candidate, ~~we continue~~the Company continues to evaluate opportunities to expand ~~our~~its product portfolio. As of ~~September 30, 2021, we do~~the date of this Quarterly Report, the Company does not have any approved or commercialized products in ~~our~~its portfolio.

Basis of Presentation. The unaudited condensed consolidated balance sheet as of ~~September 30, 2021,~~March 31, 2022, which is derived from the prior year ~~2020~~2021 audited consolidated financial statements, and the interim unaudited condensed consolidated financial statements presented herein, have been prepared in accordance with accounting principles generally accepted in the U.S. ~~(U.S. GAAP)~~(“U.S. GAAP”), the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by U.S. GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s ~~2020~~2021 Annual Report on Form 10-K filed with the ~~SEC~~United States Securities and Exchange Commission (“SEC”) on March ~~9, 2021.~~16, 2022.

The unaudited condensed consolidated financial statements include the accounts of the Company and subsidiaries, and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. All intercompany accounts and transactions have been eliminated. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

~~Reclassifications~~

~~Certain reclassifications are made to prior year amounts whenever necessary to conform with the current year presentation. Certain adjustments have been made to the balances within~~ ~~Note 11: Other Assets and Liabilities~~ ~~for the year ended December 31, 2020 to condense line items of the same nature into a single line.~~

~~Revenue.~~ ~~Prior to June 30, 2020, revenue was earned from the sales of pharmaceutical products.~~

~~Product Sales~~

Prior to June 30, 2020, we sold products primarily through wholesalers and considered these wholesalers to be our customers. Under ASC 606, revenue from product sales is recognized when the customer obtains control of our product, which occurs typically upon receipt by the customer. Our gross product sales were subject to a variety of price adjustments in arriving at reported net product sales. These adjustments included estimates of product returns, chargebacks, payment discounts, rebates, and other sales allowances and were estimated based on analysis of historical data for the product or comparable products, future expectations for such products and other judgments and analysis.

~~For a complete discussion of the accounting for net product revenue, see~~ ~~Note~~ 4~~: Revenue Recognition~~.

~~- 10 -~~

~~NOTE 2: Newly Issued Accounting Standards~~

~~Recently Adopted Accounting Guidance~~

~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. The FASB’s amendments primarily impact ASC 740, ~~Income Taxes~~, and may impact both interim and annual reporting periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. We adopted the provisions of ASU 2019-12 on January 1, 2021. Adoption of ASU 2019-12 did not have any impact on our unaudited condensed consolidated financial statements.

~~In August 2020, the FASB issued ASU 2020-06,~~ ~~Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40)~~, to reduce the complexity associated with applying U.S. GAAP principles for certain financial instruments with characteristics of liabilities and equity. The amendments in this ASU reduce the number of accounting models for convertible instruments and expand the existing disclosure requirements over earnings per share as it relates to convertible instruments. Convertible debt will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares. This ASU is effective for our fiscal year beginning January 1, 2022 and interim periods therein. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The amendments may be adopted through either a modified retrospective method, or a fully retrospective method.

The Company elected to early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective method. The Company’s 4.50% exchangeable senior notes due 2023 (the “2023 Notes”) are a convertible instrument with a cash-conversion feature that is accounted for within the scope of Subtopic 470-20. The Company calculated the cumulative-effect adjustment as of January 1, 2021 by comparing (i) the historical amortization schedule for the 2023 Notes through December 31, 2020 and (ii) an updated amortization schedule wherein the conversion feature within the 2023 Notes would not be separated as an equity component and subsequently recognized as non-cash interest expense under ASC 835-30. The adoption resulted in a $26,699 decrease in additional paid-in capital, a $12,939 increase in long-term debt, and a $13,760 increase to the opening balance of retained earnings.

~~NOTE 3: Disposition of the Hospital Products~~

On June 30, 2020 (the “Closing Date”), we announced the sale of our portfolio of sterile injectable drugs used in the hospital setting (“Hospital Products”), which included our three commercial products, Akovaz, Bloxiverz and Vazculep, as well as Nouress, to Exela Sterile Medicines LLC (“Exela Buyer”) pursuant to an Asset Purchase Agreement (the “Transaction”).

Pursuant to the Asset Purchase Agreement, the Exela Buyer agreed to pay a total aggregate consideration amount of $42,000, of which $14,500 was paid on the Closing Date and an additional $27,500 was paid in ~~ten~~ equal monthly installments following the Closing Date. During the year ended December 31, 2020, we collected four installment payments, totaling $11,000. We collected the remaining six installment payments, totaling $16,500, during 2021. In connection with the sale of the Hospital Products, the parties also agreed to cause the dismissal of the pending civil litigation related to Nouress in the District Court for the District of Delaware.

We were party to a Membership Interest Purchase Agreement, dated March 13, 2012, by and among us, Avadel Legacy, Breaking Stick Holdings, LLC, Deerfield Private Design International II, L.P. (“Deerfield International”), Deerfield Private Design Fund II, L.P. (“Deerfield Fund”) and Horizon Santé FLML, Sarl (“Horizon”) (the “Deerfield MIPA”) and a Royalty Agreement, dated February 4, 2013, by and among us, Avadel Legacy, the Deerfield Fund and Horizon (the “Deerfield Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Deerfield MIPA (with respect to certain sections thereof) and the Royalty Agreement were assigned to the Exela Buyer. Pursuant to the Purchase Agreement, the Exela Buyer assumed and will pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Deerfield Royalty Agreement for obligations that arise after the Closing Date.

We were also party to a Royalty Agreement, dated December 3, 2013, by and between us, Avadel Legacy and Broadfin Healthcare Master Fund, Ltd. (the “Broadfin Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Broadfin Royalty Agreement was assigned to the Exela Buyer and the Exela Buyer assumed and shall pay,

~~- 11 -~~

~~perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Broadfin Royalty Agreement for obligations that arise after the Closing Date.~~

The following table represents the major classes of assets and liabilities either transferred to the Exela Buyer or eliminated by us due to the sale of the Hospital Products in exchange for aggregate consideration of $42,000, less transaction fees of $2,928.

~~June 30, 2020~~

~~Prepaid expenses and other current assets~~

~~(134)~~

~~Inventories~~

~~(4,922)~~

~~Goodwill~~

~~(1,654)~~

~~Intangible assets, net~~

~~(407)~~

~~Other non-current assets~~

~~(1,095)~~

~~Total long-term contingent consideration payable~~

~~14,900~~

~~Net liabilities disposed of~~

~~6,688~~

~~Aggregate consideration~~

~~42,000~~

~~Less transaction fees~~

~~(2,928)~~

~~Net gain on the sale of the Hospital Products~~

~~45,760~~

We evaluated various qualitative and quantitative factors related to the disposition of the Hospital Products and determined that it did not meet the criteria for presentation as a discontinued operation.

The unaudited pro forma condensed combined statement of income (loss) for the nine months ended September 30, 2020 included below is being provided for information purposes only and are not necessarily indicative of the results of operations that would have resulted if the Transaction had actually occurred on the date indicated. The pro forma adjustments are based on available information and assumptions that the Company believes are attributable to the sale.

Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
Nine Months Ended September 30, 2020
As Reported Pro Forma Adjustments Notes Pro Forma
Product sales $ 22,334 $ (22,175) (a) $ 159
Total operating expense 2,259 (8,489) (b) (6,230)
Operating income (loss) 20,075 (13,686) 6,389
Income (loss) before income taxes $ 9,048 $ (13,251) (c) $ (4,203)

~~Adjustments to the pro forma unaudited condensed combined statements of income (loss)~~

~~(a)This adjustment reflects product sales attributable to the Hospital Products.~~

~~(b)This adjustment reflects the following estimated expenses attributable to the Hospital Products:~~

•~~Cost of products of $3,540.~~

•~~Research and development expenses of $407.~~

•~~Selling, general and administrative expenses of $809.~~

•~~Intangible asset amortization on acquired development technology for Vazculep of $406.~~

•~~Changes in fair value of related party contingent consideration of $3,327.The Company will no longer be responsible for these payments.~~

~~(c)This amount reflects the adjustments noted in (a) and (b) above, as well as estimated Changes in fair value of related party payableof $435 attributable to the Hospital Products.The Company will no longer be responsible for these payments.~~

~~- 12 -~~

~~NOTE 4: Revenue Recognition~~

~~Prior to June 30, 2020, we generated revenue primarily from the sale of pharmaceutical products to customers. On June 30, 2020, we sold the Hospital Products. See~~ ~~Note 3: Disposition of the Hospital Products.~~

~~Product Sales~~

Prior to June 30, 2020, we sold products primarily through wholesalers and considered these wholesalers to be our customers. Revenue from product sales was recognized when the customer obtained control of our product and our performance obligations were met, which occurred typically upon receipt of delivery to the customer. As is customary in the pharmaceutical industry, our gross product sales were subject to a variety of price adjustments in arriving at reported net product sales. These adjustments included estimates for product returns, chargebacks, payment discounts, rebates, and other sales allowances and are estimated when the product is delivered based on analysis of historical data for the product or comparable products, as well as future expectations for such products.

~~Reserves to Reduce Gross Revenues to Net Revenues~~

Revenues from product sales were recorded at the net selling price, which included estimated reserves to reduce gross product sales to net product sales resulting from product returns, chargebacks, payment discounts, rebates, and other sales allowances that are offered within contracts between the Company and its customers and end users. These reserves were based on the amounts earned or to be claimed on the related sales and were classified as reductions of accounts receivable if the amount is payable to the customer, except in the case of the estimated reserve for future expired product returns, which are classified as a liability. The reserves are classified as a liability if the amount is payable to a party other than a customer. Where appropriate, these estimated reserves take into consideration relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates to reduce gross selling price to net selling price to which it expects to be entitled based on the terms of its contracts. The actual selling price ultimately received may differ from the Company’s estimates.

~~Product Returns~~

Consistent with industry practice, the Company maintained a returns policy that generally offered customers a right of return for product that has been purchased from the Company. The Company estimated the amount of product returns and records this estimate as a reduction of revenue in the period the related product revenue was recognized. The Company estimated product return liabilities based on analysis of historical data for the product or comparable products, as well as future expectations for such products ~~and other judgments and analysis.~~

~~Chargebacks, Discounts and Rebates~~

Chargebacks, discounts and rebates represent the estimated obligations resulting from contractual commitments to sell products to its customers or end users at prices lower than the list prices charged to our wholesale customers. Customers charge the Company for the difference between the gross selling price they pay for the product and the ultimate contractual price agreed to between the Company and these end users. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargebacks, discounts and rebates are estimated at the time of sale to the customer.

~~Disaggregation of revenue~~

The Company’s source of revenue was from the sale of pharmaceutical products, which are equally affected by the same economic factors as it relates to the nature, amount, timing, and uncertainty of revenue and cash flows. For further detail about the Company’s revenues by product, see ~~Note 15: Revenue by Product~~.

~~Contract Balances~~

~~The Company does not recognize revenue in advance of invoicing its customers and therefore has no related contract assets.~~

~~A receivable is recognized in the period the Company sells its products and when the Company’s right to consideration is unconditional.~~

~~- 13 -~~

~~There were no deferred contract costs at September 30, 2021 or December 31, 2020.~~

~~Transaction Price Allocated to the Remaining Performance Obligation~~

For product sales, the Company generally satisfied its performance obligations within the same period the product was delivered. Product sales recognized in 2020 from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.

The Company has elected certain of the practical expedients from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company applies the practical expedient in ASC 606 to its stand-alone contracts and does not disclose information about variable consideration from remaining performance obligations for which the Company recognizes revenue.

NOTE 5:2: Fair Value Measurement

The Company is required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, ~~we use~~the Company uses fair value extensively when accounting for and reporting certain financial instruments, when measuring certain contingent consideration liabilities and in the initial recognition of net assets acquired in a business combination. Fair value is estimated by applying the hierarchy described below, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. When estimating fair value, depending on the nature and complexity of the asset or liability, wethe Company may generally use one or each of the following techniques:

•Income approach, which is based on the present value of a future stream of net cash flows.

•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

- 10 -

As a basis for considering the assumptions used in these techniques, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

•Level 1 - Quoted prices for identical assets or liabilities in active markets.

•Level 2 - Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.

•Level 3 - Unobservable inputs that reflect estimates and assumptions.

The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying unaudited condensed consolidated balance sheets:

As of September 30, 2021 As of December 31, 2020
Fair Value Measurements: Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Marketable securities (see Note 6)
Mutual and money market funds $ 88,568 $ — $ — $ 104,672 $ — $ —
Corporate bonds — 19,071 — — 22,155 —
Government securities - U.S. — 13,462 — — 18,999 —
Other fixed-income securities — 1,823 — — 3,854 —
Total assets $ 88,568 $ 34,356 $ — $ 104,672 $ 45,008 $ —


	As of March 31, 2022						As of December 31, 2021
Fair Value Measurements:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Marketable securities (see Note 3)
Mutual and money market funds	$	42,776	$	—	$	—	$	78,098	$	—	$	—
Corporate bonds	—		13,912		—		—		16,479		—
Government securities - U.S.	—		3,988		—		—		9,471		—
Other fixed-income securities	—		1,932		—		—		2,465		—
Total assets	$	42,776	$	19,832	$	—	$	78,098	$	28,415	$	—

~~- 14 -~~

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. During the periods ended ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, there were no transfers in and out of Level 1, 2, or 3. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, wethe Company did not recognize any allowances for credit losses.

Some of the Company’s financial instruments, such as cash and cash equivalents and accounts payable, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.

Debt

~~We estimate~~The Company estimates the fair value of ~~our~~its $143,750 aggregate principal amount of ~~the~~its 4.50% exchangeable senior notes due February 2023 ~~Notes~~(the “February 2023 Notes”) based on interest rates that would be currently available to the Company for issuance of similar types of debt instruments with similar terms and remaining maturities or recent trading prices obtained from brokers (a Level 2 input). The estimated fair value of the February 2023 Notes at ~~September 30, 2021~~March 31, 2022 is ~~$166,570.~~

$145,547. See Note 9:4: Long-Term Debt for additional information regarding ~~our~~the Company’s debt obligations.

NOTE 6:3: Marketable Securities

The Company has investments in available-for-sale debt securities which are recorded at fair market value. The change in the fair value of ~~equity investments is recognized in our unaudited condensed consolidated statements of (loss) income and the change in the fair value of~~ available-for-sale debt investments is recorded as accumulated other comprehensive loss in shareholders’ equity, net of income tax effects. As of ~~September 30, 2021, we~~March 31, 2022, the Company considered any decreases in fair value on ~~our~~its marketable securities to be driven by factors other than credit risk, including market risk.

- 11 -

The following tables show the Company’s available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively:


		September 30, 2021									March 31, 2022
Marketable Securities:	Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value		Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value

Mutual and money market funds	Mutual and money market funds	$	87,965	$	1,083	$	(480)	$	88,568	Mutual and money market funds	$	43,446	$	341	$	(1,011)	$	42,776
Corporate bonds	Corporate bonds	18,935		168		(32)		19,071		Corporate bonds	14,338		12		(438)		13,912
Government securities - U.S.	Government securities - U.S.	13,503		64		(105)		13,462		Government securities - U.S.	4,188		3		(203)		3,988

Other fixed-income securities	Other fixed-income securities	1,818		7		(2)		1,823		Other fixed-income securities	1,968		—		(36)		1,932
Total	Total	$	122,221	$	1,322	$	(619)	$	122,924	Total	$	63,940	$	356	$	(1,688)	$	62,608


		December 31, 2020									December 31, 2021
Marketable Securities:	Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value		Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value

Mutual and money market funds	Mutual and money market funds	$	103,404	$	1,288	$	(20)	$	104,672	Mutual and money market funds	$	78,331	$	813	$	(1,046)	$	78,098
Corporate bonds	Corporate bonds	21,811		350		(6)		22,155		Corporate bonds	16,478		94		(93)		16,479
Government securities - U.S.	Government securities - U.S.	18,849		155		(5)		18,999		Government securities - U.S.	9,530		39		(98)		9,471
Other fixed-income securities	Other fixed-income securities	3,839		22		(7)		3,854		Other fixed-income securities	2,473		2		(10)		2,465
Total	Total	$	147,903	$	1,815	$	(38)	$	149,680	Total	$	106,812	$	948	$	(1,247)	$	106,513

~~We determine~~

The Company determines realized gains or losses on the sale of marketable securities on a specific identification method. ~~We reflect~~The Company reflects these gains and losses as a component of investment and other (expense) income, ~~(expense),~~ net in the accompanying unaudited condensed consolidated statements of ~~(loss) income.~~loss.

The Company recognized gross realized gains of ~~$22~~$304 and ~~$136~~$11 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. These realized gains were offset by realized losses of ~~$66~~$790 and $8$68 for the three months ended ~~September 30,~~March 31, 2022 and 2021, and 2020, respectively. We recognized gross realized gains of $74 and $426 for the nine months ended September 30, 2021 and 2020, respectively. These realized gains were offset by realized losses of $173 and $886 for the nine months ended September 30, 2021 and 2020, respectively.

~~- 15 -~~

The following table summarizes the estimated fair value of ~~our~~the Company’s investments in marketable debt securities, accounted for as available-for-sale debt securities and classified by the contractual maturity date of the securities as of ~~September 30, 2021:~~

Maturities
Marketable Debt Securities: Less than 1 Year 1-5 Years 5-10 Years Greater than 10 Years Total
Corporate bonds $ 4,733 $ 14,012 $ 326 $ — $ 19,071
Government securities - U.S. 369 10,915 884 1,294 13,462
Other fixed-income securities — 1,170 653 — 1,823
Total $ 5,102 $ 26,097 $ 1,863 $ 1,294 $ 34,356
March 31, 2022:

~~We have~~


	Maturities
Marketable Debt Securities:	Less than 1 Year		1-5 Years		5-10 Years		Greater than 10 Years		Total

Corporate bonds	$	3,878	$	9,733	$	301	$	—	$	13,912
Government securities - U.S.	—		2,214		722		1,052		3,988

Other fixed-income securities	—		1,384		548		—		1,932
Total	$	3,878	$	13,331	$	1,571	$	1,052	$	19,832

The Company has classified ~~our~~its investment in available-for-sale marketable ~~debt~~ securities as current assets in the ~~unaudited condensed~~ consolidated balance sheets as the securities need to be available for use, if required, to fund current operations. There are no restrictions on the sale of any securities in ~~our~~the Company’s investment portfolio.

~~Total~~The following table shows the gross unrealized losses and fair value of ~~our~~the Company’s available-for-sale debt securities at ~~September 30, 2021 were immaterial.~~March 31, 2022. The unrealized losses in the table below are driven by factors other than credit ~~risk and have been in an unrealized loss position for less than one year. We do~~risk. The Company does not intend to sell the investments and it is not more likely than not that weit will be required to sell the investments before recovery of their amortized cost bases.

~~NOTE 7:Goodwill and Intangible Assets~~

~~The Company’s goodwill is $16,836 at September 30, 2021 and December 31, 2020.~~

The Company recorded amortization expense related to an amortizable intangible asset that was assumed by the Exela Buyer as part of the disposition of the Hospital Products on June 30, 2020 of $406 for the nine months ended September 30, 2020. Refer to ~~Note 3: Disposition of the Hospital Products. There was no amortization expense recorded during the three and nine months ended September 30, 2021 and the three months ended September 30, 2020.~~

~~NOTE 8:Contingent Consideration Payable~~

Prior to the sale of the Hospital Products on June 30, 2020, we computed the fair value of the contingent consideration using several significant assumptions and when those assumptions changed, due to underlying market conditions, the fair value of these liabilities changed as well. Each of the underlying assumptions used to determine the fair values of these contingent liabilities could, and often did, change based on adjustments in current market conditions, competition and other factors. Prior to the sale of the Hospital Products, these changes had a material impact on our unaudited condensed consolidated statements of (loss) income and balance sheets. As part of the sale of the Hospital Products on June 30, 2020, the Exela Buyer assumed and will pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy and the Company under the Deerfield Royalty Agreement. As of September 30, 2021 and December 31, 2020, the balance of the contingent consideration payable is $0.

~~The following table summarizes changes to the contingent consideration payable, a recurring Level 3 measurement, for the nine-month period ended September 30, 2020:~~


~~Contingent Consideration Payable Rollforward:~~	~~Balance~~

~~Balance, December 31, 2019~~	$	~~17,327~~
~~Payments of contingent consideration~~	~~(6,189)~~
~~Fair value adjustments~~ ~~(1)~~	~~3,762~~
~~Disposition of the Hospital Products~~	~~(14,900)~~
~~Balance, September 30, 2020~~	$	—

~~(1)~~ Fair value adjustments are reported as changes in fair value of contingent consideration and other expense - changes in fair value of contingent consideration payable in the unaudited condensed consolidated statements of (loss) income.

- 1612 -


	Less than 12 months				Greater than 12 months				Total
Marketable Debt Securities:	Fair value		Unrealized Losses		Fair value		Unrealized Losses		Fair value		Unrealized Losses
Corporate bonds	$	11,041	$	360	$	1,137	$	78	$	12,178	$	438
Government securities - U.S.	1,975		73		1,892		130		3,867		203
Other fixed-income securities	1,811		36		—		—		1,811		36
Total	$	14,827	$	469	$	3,029	$	208	$	17,856	$	677

NOTE 9:4: Long-Term Debt

Long-term debt is summarized as follows:

September 30, 2021 December 31, 2020
Principal amount of 4.50% exchangeable senior notes due 2023 $ 143,750 $ 143,750
Less: unamortized debt discount and issuance costs, net (1,664) (15,540)
Net carrying amount of liability component 142,086 128,210
Less: current maturities — —
Long-term debt $ 142,086 $ 128,210
Equity component:
Equity component of exchangeable notes, net of issuance costs $ — $ (26,699)


	March 31, 2022		December 31, 2021
Principal amount of 4.50% exchangeable senior notes due 2023	$	143,750	$	143,750
Less: unamortized debt discount and issuance costs, net	(1,041)		(1,353)
Net carrying amount of debt	142,709		142,397


Less: current maturities, net of $191 unamortized debt discount and issuance costs	26,184		—
Long-term debt	$	116,525	$	142,397

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the total interest expense was ~~$1,929~~$2,017 and ~~$3,259,~~$1,929, respectively, with coupon interest expense of $1,617 for each period and the amortization of debt issuance costs and debt discount of $312 ~~and $1,642, respectively.~~

~~For the nine months ended September 30, 2021 and 2020, the total~~for each period. Current period interest expense ~~was $5,788 and $9,686, respectively, with coupon~~also included $88 of additional interest expense ~~of $4,851 for each period and the amortization of debt issuance costs and debt discount of $937 and $4,835, respectively.~~

~~As described~~owed to be in ~~Note 2: Newly Issued Accounting Standards~~, the Company elected to early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective method. The adoption resulted in a $12,939 increase in long-term debt and a $26,699 decrease in the equity componentcompliance with certain terms of the ~~2023 Notes.~~

February 2023 Notes indenture and is not applicable to future periods.

On February 16, 2018, Avadel Finance Cayman Limited, a Cayman Islands exempted company and an indirect wholly-owned subsidiary of the Company (the “Issuer”), issued $125,000 aggregate principal amount of ~~4.50% exchangeable senior notes due~~its February 2023 ~~(the “2023 Notes”)~~Notes in a private placement (the “Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act. In connection with the Offering, the Issuer granted the initial purchasers of the February 2023 Notes a 30-day option to purchase up to an additional $18,750 aggregate principal amount of the February 2023 Notes, which was fully exercised on February 16, 2018. Net proceeds received by the Company, after issuance costs and discounts, ~~of $6,190,~~ were approximately $137,560. The February 2023 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness and effectively junior to any of the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness.

On April 5, 2022,the Issuer completed the exchange of $117,375 of its February 2023 Notes for a new series of its Exchangeable Senior Notes due October 2, 2023 (the “October 2023 Notes”, together with the February 2023 Notes, the “2023 Notes”) (the “Exchange Transaction”). The remaining $26,375 aggregate principal amount of the February 2023 Notes were not exchanged and will maintain a maturity date of February 1, 2023. Due to the Exchange Transaction, $117,375 of the February 2023 Notes will be classified as long-term debt as of March 31, 2022.

The 2023 Notes will be exchangeable at the option of the holders at an initial exchange rate of 92.6956 ADSs per $1 principal amount of 2023 Notes (so long as the principal amount of such holder’s 2023 Notes not exchanged is at least $200), which is equivalent to an initial exchange price of approximately $10.79 per ADS. ~~Such initial exchange price represents a premium of approximately 20% to the $8.99 per ADS closing price on The Nasdaq Global Market on February 13, 2018.~~ Upon the exchange of any 2023 Notes, the Issuer will pay or cause to be delivered, as the case may be, cash, ADSs or a combination of cash and ADSs, at the Issuer’s election.

February 2023 Notes

Holders of the February 2023 Notes may convert their February 2023 Notes, at their option, only under the following circumstances prior to the close of business on the business day immediately preceding August 1, 2022, under the circumstances and during the periods set forth below and regardless of the conditions described below, on or after August 1, 2022 and prior to the close of business on the business day immediately preceding the maturity date:

•Prior to the close of business on the business day immediately preceding August 1, 2022, a holder of the February 2023 Notes may surrender all or any portion of its February 2023 Notes for exchange at any time during the five business day period immediately after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1 principal amount of February 2023 Notes, as determined following a request by a holder of the

- 13 -

2023 Notes, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the ADSs and the exchange rate on each such trading day.

~~- 17 -~~

portion of a the holder’s February 2023 Notes may be surrendered for exchange at any time from or after the date that is 95 scheduled trading days prior to the anticipated effective date of the transaction (or, if later, the earlier of (x) the business day after the Company gives notice of such transaction and (y) the actual effective date of such transaction) until 35 trading days after the actual effective date of such transaction or, if such transaction also constitutes a fundamental change, until the related fundamental change repurchase date.

•Prior to the close of business on the business day immediately preceding August 1, 2022, a holder of the February 2023 Notes may surrender all or any portion of its February 2023 Notes for exchange at any time during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), if the last reported sale price of the ADSs for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day.

•If the Company calls the February 2023 Notes for redemption pursuant to Article 16 to the Indenture prior to the close of business on the business day immediately preceding August 1, 2022, then a holder of the February 2023 Notes may surrender all or any portion of its February 2023 Notes for exchange at any time prior to the close of business on the second business day prior to the redemption date, even if the February 2023 Notes are not otherwise exchangeable at such time. After that time, the right to exchange shall expire, unless the Company defaults in the payment of the redemption price, in which case a holder of the February 2023 Notes may exchange its February 2023 Notes until the redemption price has been paid or duly provided for.

October 2023 Notes

Holders of the October 2023 Notes may convert their October 2023 Notes, at their option, only under the following circumstances prior to the close of business on the business day immediately preceding May 1, 2023, under the circumstances and during the periods set forth below and regardless of the conditions described below, on or after May 1, 2023 and prior to the close of business on the business day immediately preceding the maturity date:

•Prior to the close of business on the business day immediately preceding May 1, 2023, a holder of the October 2023 Notes may surrender all or any portion of its October 2023 Notes for exchange at any time during the five business day period immediately after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1 principal amount of October 2023 Notes, as determined following a request by a holder of the October 2023 Notes, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the ADSs and the exchange rate on each such trading day.

•If a transaction or event that constitutes a fundamental change or a make-whole fundamental change occurs prior to the close of business on the business day immediately preceding May 1, 2023, regardless of whether a holder of the October 2023 Notes has the right to require the Company to repurchase the October 2023 Notes, or if Avadel is a party to a merger event that occurs prior to the close of business on the business day immediately preceding May 1, 2023, all or any portion of a the holder’s October 2023 Notes may be surrendered for exchange at any time from or after the date that is 95 scheduled trading days prior to the anticipated effective date of the transaction (or, if later, the earlier of (x) the business day after the Company gives notice of such transaction and (y) the actual effective date of such transaction) until 35 trading days after the actual effective date of such transaction or, if such transaction also constitutes a fundamental change, until the related fundamental change repurchase date.

•Prior to the close of business on the business day immediately preceding May 1, 2023, a holder of the October 2023 Notes may surrender all or any portion of its October 2023 Notes for exchange at any time during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of the ADSs for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day.

- 14 -

•If the Company calls the October 2023 Notes for redemption pursuant to Article 16 to the Indenture prior to the close of business on the business day immediately preceding May 1, 2023, then a holder of the October 2023 Notes may surrender all or any portion of its October 2023 Notes for exchange at any time prior to the close of business on the second business day prior to the redemption date, even if the October 2023 Notes are not otherwise exchangeable at such time. After that time, the right to exchange shall expire, unless the Company defaults in the payment of the redemption price, in which case a holder of the October 2023 Notes may exchange its October 2023 Notes until the redemption price has been paid or duly provided for.

The Company, at its option, may redeem for cash all of the October 2023 Notes if the last reported sale price (as defined by the indenture) of the ADSs has been at least 130% of the Exchange Price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice to redeem the October 2023 Notes.

The Company considered the guidance in ASC 815-15, Embedded Derivatives, to determine if this instrument contains an embedded feature that should be separately accounted for as a derivative. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. WeThe Company determined that this exception applies due, in part, to ~~our~~the Company’s ability to settle the 2023 Notes in cash, ADSs or a combination of cash and ADSs, at ~~our~~the Company’s option. ~~We have~~The Company has therefore applied the guidance provided by ASC 470-20, Debt with Conversion and Other Options, as amended by ASU 2020-06.

NOTE ~~10:~~5: Income Taxes

The income tax benefit was ~~$5,101~~$4,323 for the three months ended ~~September 30,~~March 31, 2022 resulting in an effective tax rate of 14.1%. The income tax benefit was $2,607 for the three months ended March 31, 2021 resulting in an effective tax rate of ~~18.8%~~16.2%. The increase in the income tax benefit ~~was $5,040~~ for the three months ended ~~September 30, 2020 resulting in an effective tax rate of 30.1%. The decrease in the effective tax rate for the three months ended September 30, 2021,~~March 31, 2022, when compared to the same period in ~~2020, is primarily attributable to a change in the mix of losses in our foreign entities.~~

~~The income tax benefit was $11,473 for the nine months ended September 30,~~ 2021, resulting in an effective tax rate of 17.3%. The income tax benefit was $9,258 for the nine months ended September 30, 2020 resulting in an effective tax rate of (102.3)%. The net increase in the effective income tax rate for the nine months ended September 30, 2021 as compared to the prior period in 2020 is primarily due to an increase in net operating losses recognized in the discrete tax benefits recognized during the nine months ended September 30, 2020 under the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, which did not occur during the nine months ended September 30, 2021.United States.

NOTE ~~11:~~6: Other Assets and Liabilities

Various other assets and liabilities are summarized as follows:

Prepaid Expenses and Other Current Assets: September 30, 2021 December 31, 2020
Income tax receivable $ 18,789 $ 18,615
Prepaid and other expenses 2,787 1,018
Other 382 798
Guarantee from Armistice 276 318
Short-term deposit — 1,477
Receivable from Exela (see Note 3)
— 16,500
Total
$ 22,234 $ 38,726


Prepaid Expenses and Other Current Assets:	March 31, 2022		December 31, 2021

Income tax receivable	$	29,122	$	29,097
Prepaid and other expenses	5,317		3,179
Guarantee from Armistice	278		279
Other	156		271
Total	$	34,873	$	32,826


Other Non-Current Assets:	March 31, 2022		December 31, 2021

Deferred tax assets	$	28,578	$	24,128
Right of use assets at contract manufacturing organizations	10,082		8,549
Guarantee from Armistice	702		771
Other	273		329
Total	$	39,635	$	33,777


Accrued Expenses	March 31, 2022		December 31, 2021

Accrued professional fees	$	7,063	$	2,678
Accrued compensation	1,755		3,167
Accrued outsource contract costs	574		1,048
Accrued restructuring	40		41
Customer allowances	—		217
Total	$	9,432	$	7,151

- 1815 -

Other Non-Current Assets: September 30, 2021 December 31, 2020
Deferred tax assets $ 29,798 $ 18,256
Right of use assets at contract manufacturing organizations 7,071 5,201
Guarantee from Armistice 841 1,050
Other 388 432
Total
$ 38,098 $ 24,939

Accrued Expenses September 30, 2021 December 31, 2020
Accrued professional fees $ 4,661 $ 2,781
Accrued compensation 2,403 1,697
Accrued outsource contract costs 909 473
Customer allowances 722 1,030
Accrued restructuring (see Note 12)
43 520
Total
$ 8,738 $ 6,501


Other Current Liabilities:	Other Current Liabilities:	September 30, 2021		December 31, 2020		Other Current Liabilities:	March 31, 2022		December 31, 2021

Accrued interest	Accrued interest	$	1,078	$	2,695	Accrued interest	$	1,094	$	4,920
Guarantee to Deerfield	Guarantee to Deerfield	277		319		Guarantee to Deerfield	279		280
Other	Other	116		160		Other	69		70
Due to Exela		—		2,026
Total	Total	$	1,471	$	5,200	Total	$	1,442	$	5,270

Other Non-Current Liabilities: September 30, 2021 December 31, 2020
Tax liabilities and other $ 3,155 $ 3,159
Guarantee to Deerfield 844 1,053
Total
$ 3,999 $ 4,212

~~NOTE 12: Restructuring Costs~~

~~2019 French Restructuring~~

During the second quarter of 2019, the Company initiated a plan to substantially reduce all of its workforce at its Vénissieux, France site (“2019 French Restructuring”). This reduction was part of an effort to align the Company’s cost structure with our ongoing and future planned projects. The reduction in workforce was completed during 2020. Restructuring (income) charges associated with this plan recognized during the three and nine months ended September 30, 2021 and 2020 were immaterial.

~~The following table sets forth activities for the Company’s cost reduction plan obligations as of September 30, 2021:~~

~~2019 French Restructuring Obligation:~~

~~2021~~

~~Balance of restructuring accrual at January 1,~~

~~248~~

~~Income for employee severance, benefits and other costs~~

~~(122)~~

~~Payments~~

~~(76)~~

~~Foreign currency impact~~

~~(7)~~

~~Balance of restructuring accrual at September 30,~~

~~The 2019 French Restructuring liabilities of $43 are included in the unaudited condensed consolidated balance sheet in accrued expenses at September 30, 2021.~~

~~- 19 -~~

~~2019 Corporate Restructuring~~

During the first quarter of 2019, the Company announced a plan to reduce its corporate workforce by more than 50% (“2019 Corporate Restructuring”). The reduction in workforce was primarily a result of the exit of Noctiva during the first quarter of 2019, as well as an effort to better align the Company’s remaining cost structure at our U.S. and Ireland locations with our ongoing and future planned projects. The reduction in workforce was completed during 2020. The restructuring charges associated with this plan recognized during the three and nine months ended September 30, 2021 and 2020 were immaterial.

~~During 2021, the Company paid $272 for its cost reduction plan obligations and has no remaining obligation for the 2019 Corporate Restructuring plan as of September 30, 2021.~~


Other Non-Current Liabilities:	March 31, 2022		December 31, 2021

Tax liabilities	$	3,143	$	3,143
Guarantee to Deerfield	704		774
Total	$	3,847	$	3,917

NOTE ~~13:~~7: Net ~~(Loss) Income~~Loss Per Share

Basic net ~~(loss) income~~loss per share is calculated by dividing net ~~(loss) income~~loss by the weighted average number of shares outstanding during each period. Diluted net ~~(loss) income~~loss per share is calculated by dividing net ~~(loss) income~~loss - diluted by the diluted number of shares outstanding during each period. Except where the result would be anti-dilutive to net ~~(loss) income,~~loss, diluted net ~~(loss) income~~loss per share would be calculated assuming the impact of the conversion of the 2023 Notes, the conversion of ~~our~~the Company’s preferred shares, the exercise of outstanding equity compensation awards, and ordinary shares expected to be issued under ~~our employee stock purchase plan~~the Company’s Employee Share Purchase Plan (“ESPP”).

~~We have~~The Company has a choice to settle the conversion obligation under the 2023 Notes in cash, shares or any combination of the two. ~~We utilize~~The Company utilizes the if-converted method to reflect the impact of the conversion of the 2023 Notes, unless the result is anti-dilutive. This method assumes the conversion of the 2023 Notes into shares of ~~our~~the Company’s ordinary shares and reflects the elimination of the interest expense related to the 2023 Notes.

The dilutive effect of the stock options, restricted stock units, preferred shares and ordinary shares expected to be issued under ~~our~~the Company’s ESPP has been calculated using the treasury stock method. The dilutive effect of the performance share ~~units~~unit awards (“PSUs”) will be calculated using the treasury stock method, if and when the contingent vesting condition is achieved.

A reconciliation of basic and diluted net ~~(loss) income~~loss per share, together with the related shares outstanding in thousands is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
Net (Loss) Income Per Share:		2021		2020		2021		2020
Net Loss Per Share:										Net Loss Per Share:		2022		2021

Net (loss) income		$	(22,002)	$	(11,703)	$	(55,028)	$	18,306
Net loss										Net loss		$	(26,424)	$	(13,445)

Weighted average shares:	Weighted average shares:									Weighted average shares:
Basic shares	Basic shares	58,585		58,213		58,506		51,206		Basic shares		58,824		58,443
Effect of dilutive securities—employee and director equity awards outstanding, preferred shares and 2023 Notes	Effect of dilutive securities—employee and director equity awards outstanding, preferred shares and 2023 Notes	—		—		—		1,643		Effect of dilutive securities—employee and director equity awards outstanding, preferred shares and 2023 Notes		—		—

Diluted shares	Diluted shares	58,585		58,213		58,506		52,849		Diluted shares		58,824		58,443

Net (loss) income per share - basic		$	(0.38)	$	(0.20)	$	(0.94)	$	0.36
Net (loss) income per share - diluted		$	(0.38)	$	(0.20)	$	(0.94)	$	0.35
Net loss per share - basic										Net loss per share - basic		$	(0.45)	$	(0.23)
Net loss per share - diluted										Net loss per share - diluted		$	(0.45)	$	(0.23)

Potential ordinary shares of ~~15,684~~17,696 and ~~15,969~~15,275 were excluded from the calculation of weighted average shares for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and potential ordinary shares of 15,497 and 15,789 were excluded from the calculation of weighted average shares for the nine months ended September 30, 2021 and 2020,~~ respectively, because either their effect was considered to be anti-dilutive or they were related to shares from PSUs for which the contingent vesting condition had not been achieved. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and for the three months ended September 30, 2020,~~ the effects of dilutive securities were entirely excluded from the calculation of net loss per share as a net loss was reported in these periods.

- 2016 -

NOTE ~~14:~~8: Comprehensive Loss

The following table shows the components of accumulated other comprehensive loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, net of tax effects:

Three Months Ended September 30, Nine Months Ended September 30,
Accumulated Other Comprehensive Loss: 2021 2020 2021 2020
Foreign currency translation adjustment:
Beginning balance $ (23,229) $ (23,733) $ (22,627) $ (23,738)
Net other comprehensive (loss) income (237) 534 (839) 539
Balance at September 30, $ (23,466) $ (23,199) $ (23,466) $ (23,199)
Unrealized gain on marketable debt securities, net
Beginning balance $ 879 $ 1,215 $ 1,576 $ 932
Net other comprehensive (loss) income, net of income tax (benefit) provision of $(59), $1 $(220) and $131, respectively (157) 66 (854) 349
Balance at September 30, $ 722 $ 1,281 $ 722 $ 1,281
Accumulated other comprehensive loss at September 30, $ (22,744) $ (21,918) $ (22,744) $ (21,918)


	Three Months Ended March 31,
Accumulated Other Comprehensive Loss:		2022		2021

Foreign currency translation adjustment:
Beginning balance		$	(23,855)	$	(22,627)
Net other comprehensive loss		(185)		(718)
Balance at March 31,		$	(24,040)	$	(23,345)

Unrealized (loss) gain on marketable debt securities, net
Beginning balance		$	(85)	$	1,576
Net other comprehensive loss, net of income tax benefit (expense) of $330 and $(55), respectively		(917)		(537)
Balance at March 31,		$	(1,002)	$	1,039
Accumulated other comprehensive loss at March 31,		$	(25,042)	$	(22,306)

The effect on the Company’s unaudited condensed consolidated financial statements of amounts reclassified out of accumulated other comprehensive loss was immaterial for all periods presented.

~~NOTE 15:Revenue by Product~~

The Company has determined that it operates in 1 segment, the development and commercialization of pharmaceutical products, including controlled-release therapeutic products based on our proprietary polymer based technology. The Company’s Chief Operating Decision Maker is the Chief Executive Officer (the “CEO”). The CEO reviews profit and loss information on a consolidated basis to assess performance and make overall operating decisions as well as resource allocations. All products were included in 1 segment because the Company’s products have similar economic and other characteristics, including the nature of the products and production processes, type of customers, distribution methods and regulatory environment.

~~On June 30, 2020, we sold the Hospital Products. See~~ ~~Note 3: Disposition of the Hospital Products~~. The following table presents a summary of total product sales by these products for the nine months ended September 30, 2020. The Company had no revenue during the three and nine months ended September 30, 2021 and the three months ended September 30, 2020:

~~Nine Months Ended September 30,~~

~~Product Sales by Product:~~

~~2020~~

~~Bloxiverz~~

~~2,201~~

~~Vazculep~~

~~10,429~~

~~Akovaz~~

~~9,545~~

~~Other~~

~~159~~

~~Total product sales~~

~~22,334~~

NOTE ~~16:~~9: Commitments and Contingencies

Litigation

The Company is subject to potential liabilities generally incidental to ~~our~~the Company’s business arising out of present and future lawsuits and claims related to product liability, personal injury, contract, commercial, intellectual property, tax, employment, compliance and other matters that arise in the ordinary course of business. The Company accrues for potential liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were no contingent liabilities with respect to any litigation, arbitration or administrative or

~~- 21 -~~

other proceeding that are reasonably likely to have a material adverse effect on the Company’s ~~unaudited condensed~~ consolidated financial position, results of operations, cash flows or liquidity.

First Complaint

On May 12, 2021, Jazz Pharmaceuticals, Inc. (“Jazz”) filed a formal complaint (the “First Complaint”) initiating a lawsuit in the United States District Court for the District of Delaware (the “Court”) against Avadel Pharmaceuticals plc, Avadel US Holdings, Inc., Avadel Management Corporation, Avadel Legacy Pharmaceuticals, LLC, Avadel Specialty Pharmaceuticals, LLC, and Avadel CNS Pharmaceuticals, LLC (collectively, the “Avadel Parties”). In the First Complaint, Jazz alleges the sodium oxybate product (“Proposed Product”) described in the NDA owned by Avadel CNS Pharmaceuticals, LLC will infringe at least one claim of US Patent No. 8731963, 10758488, 10813885, 10959956 and/or 10966931 (collectively, the “patents-in-suit”). The First Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses.

On June 3, 2021, the Avadel Parties timely filed their Answer and Counterclaims (the “Avadel Answer”) with the Court in response to the First Complaint. The Avadel Answer generally denies the allegations set forth in the First Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patents-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of each patent-in-suit, and ii) a declaratory judgment of invalidity of each patent-in-suit.

On June 18, 2021, Jazz filed its Answer (“Jazz Answer”) with the Court in response to the Avadel Answer. The Jazz Answer generally denies the allegations set forth in the Avadel Answer and sets forth a single affirmative defense asserting that Avadel has failed to state a claim for which relief can be granted.

On June 21, 2021, the Court issued an oral order requiring the parties to i) confer regarding proposed dates to be included in the Court’s scheduling order for the case, and ii) submit a proposed order, including a proposal for the length and timing of trial, to the Court by no later than July 21, 2021.

- 17 -

On July 30, 2021, the Court issued a scheduling order establishing timing for litigation events including i) a claim construction hearing date of August 2, 2022, and ii) a trial date of October 30, 2023.

On October 18, 2021, consistent with the scheduling order, Jazz filed a status update with the Court indicating that Jazz did not intend to file a preliminary injunction with the Court at this time.Jazz further indicated that it would provide the Court with an update regarding whether preliminary injunction proceedings may be necessary after receiving further information regarding the FDA’s action on Avadel’s NDA.

On January 4, 2022, the Court entered an agreed order dismissing this case with respect to Avadel Pharmaceuticals plc, Avadel US Holdings, Inc., Avadel Specialty Pharmaceuticals, LLC, Avadel Legacy Pharmaceuticals, LLC, and Avadel Management Corporation. A corresponding order was entered in the two below cases on the same day.

On February 25, 2022, Jazz filed an amended Answer to Avadel’s Counterclaims (“the Jazz First Amended Answer”). The Jazz First Amended Answer is substantially similar to the Jazz Answer except insofar as it adds an affirmative defense for judicial estoppel and unclean hands. Corresponding amended Answers were filed in the two below cases on the same day.

Second Complaint

On August 4, 2021, Jazz filed another formal complaint (the “Second Complaint”) initiating a lawsuit in the Court against the Avadel Parties. In the Second Complaint, Jazz alleges the Proposed Product described in the NDA owned by Avadel CNS Pharmaceuticals, LLC will infringe at least one claim of US Patent No. 11077079. The Second Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses.

On September 9, 2021, the Avadel Parties timely filed their Answer and Counterclaims (the “Second Avadel Answer”) with the Court in response to the Second Complaint. The Second Avadel Answer generally denies the allegations set forth in the Second Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patent-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of the patent-in-suit, and ii) a declaratory judgment of invalidity of the patent-in-suit.

On October 22, 2021, the Court issued an oral order stating that this case should proceed on the same schedule as the case filed on May 12, ~~2021.~~2021

Third Complaint

On November 10, 2021, Jazz filed another formal complaint (the “Third Complaint”) initiating a lawsuit in the Court against the Avadel Parties. In the Third Complaint, Jazz alleges the Proposed Product described in the NDA owned by Avadel CNS Pharmaceuticals, LLC will infringe at least one claim of US Patent No. 11147782. The Third Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses. This case will proceed on the same schedule as the cases associated with the First and Second Complaints above.

On January 7, 2022, Avadel CNS Pharmaceuticals LLC timely filed its Answer and Counterclaims (the “Third Avadel Answer”) with the Court in response to the Third Complaint. The Third Avadel Answer generally denies the allegations set forth in the Third Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patent-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of the patent-in-suit, and ii) a declaratory judgment of invalidity/unenforceability of the patent-in-suit.

On December 21, 2021, the Court entered a revised schedule for the First, Second and Third Complaints, setting a new claim construction date of August 31, 2022.

Material Commitments

Other than commitments disclosed in Note ~~17:~~15: Contingent Liabilities and Commitments to the Company's consolidated financial statements included in the ~~2020~~2021 Annual Report on Form 10-K, there were no other material commitments outside of the normal course of business.

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Guarantees

Deerfield Guarantee

The fair values of ~~our~~the Company’s guarantee to Deerfield and the guarantee received by usthe Company from Armistice Capital Master Fund, Ltd. largely offset and when combined are not material.

In connection with ~~our~~the Company’s February 2018 divestiture of ~~our~~the Company’s pediatric assets, wethe Company guaranteed to Deerfield the quarterly royalty payment of 15% on net sales of the FSC products through February 6, 2026 (“FSC Product Royalties”), in an aggregate amount of up to approximately $10,300. Given ~~our~~the Company’s explicit guarantee to Deerfield, the Company recorded the guarantee in accordance with ASC 460. The balance of this guarantee liability was ~~$1,121~~$983 at ~~September 30, 2021.~~March 31, 2022. This liability is being amortized proportionately based on undiscounted cash outflows through the remainder of the contract with Deerfield.

Armistice Guarantee

In connection with ~~our~~the Company’s February 2018 divestiture of the pediatric assets, Armistice Capital Master Fund, Ltd., the majority shareholder of Cerecor, Inc., guaranteed to usthe Company the FSC Product Royalties. The Company recorded the guarantee in accordance with ASC 460. The balance of this guarantee asset was ~~$1,117~~$980 at ~~September 30, 2021.~~March 31, 2022. This asset is being amortized proportionately based on undiscounted cash outflows through the remainder of the contract with Deerfield.

Off-Balance Sheet Arrangements

As of ~~September 30, 2021, we~~March 31, 2022, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

NOTE ~~17:~~10: Subsequent Events

Exchange Transaction Closing

On April 5, 2022,Avadel completed the exchange of $117,375 of its February 2023 Notes for a new series of its Exchangeable Senior Notes due October ~~15, 2021, we announced~~2, 2023. The remaining $26,375 aggregate principal amount of the February 2023 Notes were not exchanged and will maintain a maturity date of February 1, 2023. The Company paid $4,804 in fees paid to noteholders of the October 2023 Notes and $5,449 in fees paid to third parties as part of the completed Exchange Transaction. See Note 4: Long-Term Debt for additional information regarding the Company’s debt obligations.

Jazz Litigation

On April 14, 2022, Avadel CNS Pharmaceuticals LLC and Avadel Pharmaceuticals plc (collectively the “Avadel Plaintiffs”) filed a formal complaint (the “Avadel Complaint”) initiating a lawsuit in the Court against Jazz and Jazz Pharmaceuticals Ireland Ltd. (collectively, the “Jazz Parties”). In the Avadel Complaint, the Avadel Plaintiffs allege that the ~~FDA informed us that the review~~Jazz Parties breached certain confidential disclosure agreements and misappropriated certain of ~~our NDA for FT218 was ongoing beyond its previously assigned target action date.~~Avadel’s trade secrets. The Avadel Complaint further includes typical relief requests such as injunctive relief, monetary damages and attorneys’ fees, costs and expenses, as well as seeking correction of inventorship of certain Jazz patents to include former Avadel scientists.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis

(In thousands, except per share data)

(Unaudited)

You should read the discussion and analysis of our financial condition and results of operations set forth in this Item 2 together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties, and reference is made to the “Cautionary Note Regarding Forward-Looking Statements” set forth immediately following the Table of Contents of this Quarterly Report on Form 10-Q for further information on the forward looking statements herein. In addition, you should read the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~9, 2021~~16, 2022 and Part II, Item 1A in this Quarterly Report on Form 10-Q for a discussion of additional important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report.

Overview

General Overview

Avadel Pharmaceuticals plc (Nasdaq: AVDL) (“Avadel,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company. Our lead product candidate, FT218, is an investigational once-nightly, extended-release formulation of sodium oxybate for the treatment of excessive daytime sleepiness (“EDS”) ~~and~~or cataplexy in adults with narcolepsy. We are primarily focused on the development and potential United States (“U.S.”) Food and Drug Administration (“FDA”) approval of FT218. In December 2020, we submitted a New Drug Application (“NDA”) to the FDA for FT218 to treat excessive daytime sleepiness ~~and~~or cataplexy in adults with narcolepsy. In February 2021, the NDA for FT218 was accepted by the FDA and was assigned a Prescription Drug User Fee Act (“PDUFA”) target action date of October 15, 2021. On October 15, 2021, we announced that the FDA informed us that the review of our NDA for FT218 was ongoing beyond its previously assigned target action date. As of the date of this Quarterly Report, the FDA’s review of our NDA for FT218 remains ongoing.

Outside of our lead product candidate, we continue to evaluate opportunities to expand our product portfolio. As of ~~September 30, 2021,~~the date of this Quarterly Report, we do not have any approved or commercialized products in our portfolio.

FT218

FT218 is a once-nightly formulation of sodium oxybate that uses our Micropump controlled release drug-delivery technology for the treatment of EDS ~~and~~or cataplexy in adults suffering from narcolepsy. Sodium oxybate is the sodium salt of gamma hydroxybutyrate, an endogenous compound and metabolite of the neurotransmitter gamma-aminobutyric acid. ~~Sodium~~Immediate release sodium oxybate is approved in the U.S. for the treatment of EDS ~~and~~or cataplexy in patients with narcolepsy and is approved in Europe for the treatment of cataplexy in patients with narcolepsy. Since 2002, sodium oxybate has only been available as a formulation that must be taken twice nightly, first at bedtime, and then again 2.5 to 4 hours later.

On December 16, 2020, we announced the submission of our NDA to the FDA for FT218. On February 26, 2021, the FDA notified us of formal acceptance of the NDA and assigned a PDUFA target action date of October 15, 2021. On October 15, 2021, we announced that the FDA informed us that the review of our NDA for FT218 was ongoing beyond its previously assigned target action date. As of the date of this Quarterly Report, the FDA’s review of our NDA for FT218 remains ongoing.

We conducted a Phase 3 clinical trial of FT218, the REST-ON trial, which was a randomized, double-blind, placebo-controlled study that enrolled 212 patients who received at least one dose of FT218 or placebo, and was conducted in clinical sites in the U.S., Canada, Western Europe and Australia. The last patient, last visit was completed at the end of the first quarter of 2020, and positive top line data from the REST-ON trial was announced on April 27, 2020. Patients who received 9 g of once-nightly FT218, the highest dose administered in the trial, demonstrated a statistically significant and clinically meaningful improvement compared to placebo across the three co-primary endpoints of the trial: maintenance of wakefulness test ~~or MWT,~~(“MWT”), clinical global impression-improvement ~~or CGI-I,~~(“CGI-I”), and mean weekly cataplexy attacks. The lower doses assessed, 6 g and 7.5 g also demonstrated a statistically significant and clinically meaningful improvement on all three co-primary endpoints compared to

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placebo. We observed the 9 g dose of once-nightly FT218 to be generally well tolerated. Adverse reactions commonly associated with sodium oxybate were observed in a small number of patients (nausea 1.3%, vomiting 5.2%, decreased appetite 2.6%, dizziness 5.2%, somnolence 3.9%, tremor 1.3% and enuresis 9%), and 3.9% of the patients who received 9 g of FT218 discontinued the trial due to adverse reactions.

In January 2018, the FDA granted FT218 ~~Orphan Drug Designation,~~orphan drug designation for the treatment of narcolepsy, which makes ~~the drug~~FT218 potentially eligible for certain development and commercial incentives, including potential U.S. market exclusivity for up to seven years. Additionally, several FT218-related U.S. patents have been issued, and there are additional patent applications currently in development and/or pending at the U.S. Patent and Trademark Office (“USPTO”), as well as foreign patent offices.

In July 2020, we announced that the first patient was dosed ~~initiating an~~in our open-label extension (“OLE”)/switch study of FT218 as a potential treatment for EDS ~~and~~or cataplexy in patients with narcolepsy. The OLE/switch study is examining the long-term safety and maintenance of efficacy of FT218 in patients with narcolepsy who participated in the REST-ON study, as well as dosing and preference data for patients switching from twice-nightly sodium oxybate to once-nightly FT218, regardless of whether they participated in REST-ON. In May 2021, inclusion criteria were expanded to allow for oxybate naïve patients to enter the study.

New secondary endpoints from the REST-ON trial were presented at the American Academy of Neurology, beginning April 17, 2021. The first poster described FT218 improvements in disturbed nocturnal sleep (“DNS”), defined in REST-ON as the number of shifts from stages N1, N2, N3, and rapid eye movement (“REM”) sleep to wake and from stages N2, N3, and REM sleep to stage N1. FT218 also decreased the number of nocturnal arousals as measured on polysomnography. Improvements in DNS were further supported by post-hoc analyses demonstrating increased time in deep sleep (N3, also known as slow wave sleep), and less time in N1. A second poster described the statistically significant improvements in the Epworth Sleepiness Scale, both the quality of sleep and the refreshing nature of sleep, and a decrease in sleep paralysis. These clinically relevant improvements were observed for all doses, beginning at ~~Week~~week 3, for the lowest 6 g dose, compared to placebo. FT218 did not demonstrate significant improvement for hypnagogic hallucinations compared to placebo.

Additional data supportive of the efficacy findings in REST-ON were presented at the ~~annual meeting of the 35~~th35th Annual Meeting of the Associated Professional Sleep Societies, a joint meeting of the American Academy of Sleep Medicine and the Sleep Research Society, also known as SLEEP 2021, beginning June 10, 2021. New data included post-hoc analyses demonstrating endpoints improvements, regardless of concomitant stimulant use, in both narcolepsy Type 1 or Type 2. Additionally, a post-hoc analysis showed that FT218 was associated with decreased body mass index compared to placebo, which may be relevant as people with narcolepsy often have co-morbid obesity. In August 2021, the primary results from the REST-ON trial were published by Kushida et al. in the journal SLEEP.

New data was presented at the American College of Chest Physicians annual meeting (“CHEST”), beginning October 17, 2021, including additional post-hoc analyses from the REST-ON trial, demonstrating a greater proportion of patients receiving FT218 experienced reductions in weekly cataplexy attacks and improvement in mean sleep latency compared to placebo, as well as the results of a discrete choice experiment, indicating that the overall driver of patient preference between sodium oxybate treatments is a once-nightly, versus twice-nightly, formulation.

New data was presented at World Sleep 2022 congress, which was held March 11 through 16, 2022 in Rome, Italy. A total of eight posters were presented, including five new post-hoc analyses from the REST-ON trial. Most notably, the post-hoc analyses showed that FT218 demonstrated improvement in subjective measures of daytime sleepiness, sleep quality and refreshing nature of sleep as early as week 1 with the 4.5 g starting dose, with even greater improvement at week 2 soon after starting the 6 g dose compared to placebo. Additional post-hoc analyses, stratified by narcolepsy type, as well as concomitant stimulant use, or without stimulants, demonstrated positive results that are generally consistent with previously reported positive endpoints from REST-ON and add to the existing body of evidence for FT218.

In addition, the results of a discrete choice experiment (“DCE”) were presented, which confirmed that once-nightly dosing, when compared to twice-nightly dosing, was the most important attribute driving both patient and clinician preference for overall oxybate product choice, as well as patient quality of life and reduction of patient anxiety/stress; dosing frequency (twice-nightly versus once-nightly) was also viewed as a more important attribute as compared to other attributes assessed, including sodium content. Accompanying the DCE was a background survey for both patients and clinicians, which showed that dosing frequency was noted as a significant stressor by both patients and clinicians. The World Sleep 2022 presentations also included the first presentation of an interim safety analysis from the ongoing RESTORE OLE/switch study, which showed that FT218 has generally been well-tolerated, with some patients receiving therapy for more than 18 months, and no new safety signals have been observed.

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We believe FT218 has the potential to demonstrate improved dosing compliance, safety and patient satisfaction over the current standards of care for EDS ~~and~~or cataplexy in patients with narcolepsy, which are twice-nightly oxybate formulations. If approved, we believe FT218 has the potential to take a significant share of the oxybate market. The current market size for the twice-nightly administration of oxybate products is an estimated $1.8 billion annually.

Micropump Drug-Delivery Technology

Our Micropump drug-delivery technology allows for the controlled delivery of small molecule drugs taken orally, which has the potential to improve dosing compliance, reduce toxicity and improve patient compliance. Beyond FT218, we believe there could be other product development opportunities for our Micropump drug-delivery technology, representing either life cycle opportunities, whereby additional intellectual property can be added to a pharmaceutical product to extend the commercial viability of a currently marketed product, or innovative formulation opportunities for new chemical entities.

~~Previously Approved FDA Products~~

On June 30, 2020 (“Closing Date”), we announced the sale of our portfolio of sterile injectable drugs used in the hospital setting (the “Hospital Products”), including our three commercial products, Akovaz, Bloxiverz and Vazculep, as well as Nouress, to Exela Sterile Medicines LLC (“Exela Buyer”). This sale included the following FDA approved products:

•~~Bloxiverz (neostigmine methylsulfate injection)~~ ~~- Bloxiverz is a drug used intravenously in the operating room to reverse the effects of non-depolarizing neuromuscular blocking agents after surgery.~~

~~- 25 -~~

•~~Vazculep (phenylephrine hydrochloride injection)~~ ~~- Vazculep is indicated for the treatment of clinically important hypotension occurring in the setting of anesthesia.~~

•~~Akovaz (ephedrine sulfate injection)~~ - Akovaz was the first FDA approved formulation of ephedrine sulfate, an alpha- and beta- adrenergic agonist and a norepinephrine-releasing agent that is indicated for the treatment of clinically important hypotension occurring in the setting of anesthesia.

•~~Nouress (cysteine hydrochloride injection)~~ ~~- Nouress is a sterile injectable product for use in the hospital setting to provide parenteral nutrition to neonates.~~

~~Corporate Information~~

We are an Irish public limited company. Our registered address is at 10 Earlsfort Terrace, Dublin 2, Ireland and our phone number is +353-1-920-1000. We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our website is www.avadel.com, where we make available free of charge our reports (and any amendments thereto) on Forms 10-K, 10-Q and 8-K as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. These filings are also available to the public at www.sec.gov.

We currently have five direct wholly-owned subsidiaries: (a) Avadel US Holdings, Inc., (b) Flamel Ireland Limited is an Irish limited company, which conducts business under the name Avadel Ireland, (c) Avadel Investment Company Limited, (d) Avadel Finance Ireland Designated Activity Company and (e) Avadel France Holding SAS. Avadel US Holdings, Inc., a Delaware corporation, is the holding entity of (i) Avadel Specialty Pharmaceuticals, LLC, (ii) Avadel Legacy Pharmaceuticals, LLC, (iii) Avadel Management Corporation, and (iv) Avadel CNS Pharmaceuticals LLC. Avadel Finance Ireland Designated Activity Company is the holding entity of Avadel Finance Cayman Limited. Avadel France Holding SAS is the holding entity of Avadel Research SAS. A complete list of our subsidiaries can be found in Exhibit 21.1 of our Annual Report on Form 10-K filed with the SEC on March 9, 2021.

Key Business Trends and Highlights

In operating our business and monitoring our performance, we consider a number of performance measures, as well as trends affecting our industry as a whole, which include the following:

•Healthcare and Regulatory Reform: Various health care reform laws in the U.S. may impact our ability to successfully commercialize our products and technologies. The success of our commercialization efforts may depend on the extent to which the government health administration authorities, the health insurance funds in the E.U. Member States, private health insurers and other third-party payers in the U.S. will reimburse consumers for the cost of healthcare products and services.

•Competition and Technological Change: Competition in the pharmaceutical and biotechnology industry continues to be intense and is expected to increase. We compete with ~~academic laboratories, research institutions, universities, joint ventures, and~~ other pharmaceutical and biotechnology ~~companies, including other companies developing niche branded or generic specialty pharmaceutical products or drug delivery platforms.~~companies. Furthermore, major technological changes can happen quickly in the pharmaceutical and biotechnology industries. Such rapid technological change, or the development by our competitors of technologically improved or differentiated products, could render our products, product candidates, or drug delivery platforms obsolete or noncompetitive.

•Pricing Environment for Pharmaceuticals: The pricing environment continues to be in the political spotlight in the U.S. As a result, the need to obtain and maintain appropriate pricing for pharmaceutical products may become more challenging due to, among other things, the attention being paid to healthcare cost containment and other austerity measures in the U.S. and worldwide.

•Generics Playing a Larger Role in ~~Healthcare~~Healthcare:: Generic pharmaceutical products will continue to play a large role in the U.S. healthcare system. As such, we expect to see generic competition for our products in the future. If approved, we anticipate FT218 may face competition from manufacturers of generic twice-nightly sodium oxybate formulations, who have reached settlement agreements with the current marketer, which allows for entry of an authorized generic in 2023, or earlier under certain circumstances. For example, Hikma Pharmaceuticals PLC is expected to launch a generic version of sodium oxybate in 2023 or earlier, depending on certain circumstances. Beyond 2023, there are other potential future competitive products and additional generic twice-nightly sodium oxybate formulations that could impact the marketplace.

•Access to and Cost of Capital: The process of raising capital and associated cost of such capital for a company of our financial profile can be difficult and potentially expensive. If the need were to arise to raise additional capital, access to that capital may be difficult, expensive and/or dilutive and, as a result, could create liquidity challenges for the Company.

~~- 26 -~~

•Net Loss from Operations in ~~2021~~2022: We ~~sold~~do not have any approved or commercialized products in our ~~Hospital Products at June 30, 2020 and no longer generate revenue.~~portfolio. We will incur substantial expenses to further the clinical development of and continue our preparations for the commercial launch of FT218, if approved.

Impact of COVID-19

Since early 2020, we have seen the profound impact that the ~~ongoing~~ coronavirus (“COVID-19”) pandemic is having on human health, the global economy and society at large. We have continued to actively monitor the COVID-19 pandemic, as well as new variants of the virus and recent increases in case numbers, and have taken measures to mitigate the potential impacts to our

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employees and business, such as continuing to offer a work from home policy. We believe the ongoing impact of COVID-19 and measures to prevent its spread could impact our business in a number of ways, including: i) possibly delaying ~~any remaining development activities for FT218, the FDA review timeline of FT218, and/or~~ our ongoing RESTORE ~~open-label extension/~~OLE/switch study, ii) disruptions to our supply chain and third parties; iii) ~~requiring~~allowing our employees to work from home for an extended period of time; and iv) hindering sales efforts for FT218, if approved. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition. Despite progress in vaccination efforts, future developments and impact on our operations remain uncertain and cannot be predicted with confidence, including the duration of the COVID-19 pandemic, new ~~strains~~variants of the virus, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or we, may direct, which may result in extending continued business disruptions.

Financial Highlights

Highlights of our consolidated results for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are as follows:

•Revenue was $0 for the three and nine months ended September 30, 2021, compared to $0 and $22,334 in the same periods last year, respectively. The year over year decrease for the comparative nine month periods was the result of the sale of the Hospital Products on June 30, 2020.

•Operating loss was ~~$25,663 and $62,410~~$28,626 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared to operating loss of ~~$13,697~~$14,811 for the three months ended ~~September 30, 2020~~March 31, 2021. Selling, general and ~~operating income of $20,075 and for~~administrative expenses increased in the ~~nine months ended September 30, 2020. Operating income for the nine months ended September 30, 2020 was~~current period by $10,623, driven by the ~~sale~~Company’s continued commercial preparations and launch readiness activities for the potential approval of ~~the Hospital Products on June 30, 2020.~~FT218.

•Net loss was ~~$22,002 and $55,028~~$26,424 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared to net loss of ~~$11,703 and net income of $18,306~~$13,445 in the same period last ~~year, respectively.~~year.

•Diluted net loss per share was ~~$(0.38) and $(0.94)~~$0.45 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, compared to diluted net loss per share of ~~$(0.20) and diluted net income per share of $0.35~~$0.23 in the same period last ~~year, respectively.~~year.

•Cash and marketable securities decreased ~~$40,309~~$33,740 to ~~$181,093~~$123,481 at ~~September 30, 2021,~~March 31, 2022, from ~~$221,402~~$157,221 at December 31, ~~2020.~~2021. The decrease in cash during the quarter was driven primarily by cash used ~~for~~in operating ~~expenses~~activities of $34,045, which included approximately ~~$50,000, approximately $6,470~~$5,500 of interest payments and approximately ~~$2,850 for the purchase~~$4,800 of raw materials used for FT218 pre-NDA approval activities. Cash spend was offset by $14,500 of net cash received from Exela and approximately $4,500 related to research and development tax credits and other refunds.insurance policy payments.

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Critical Accounting Estimates

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. To prepare these financial statements, management makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Actual results could be significantly different from these estimates.

Our significant accounting policies are described in Note 1 of the audited consolidated financial statements included in our Annual Report Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”). The SEC suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the part of management in its application. Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies” section of the Management’s Discussion & Analysis in our ~~2020~~2021 Form 10-K.

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Results of Operations

The following is a summary of our financial results (in thousands, except per share amounts) for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively:

Three Months Ended September 30, Change
2021 vs. 2020
Comparative Statements of Loss 2021 2020 $ %
Operating expenses:
Research and development expenses 4,380 5,569 (1,189) (21.4) %
Selling, general and administrative expenses 21,283 8,423 12,860 152.7 %
Changes in fair value of contingent consideration — (69) 69 100.0 %
Restructuring income — (226) 226 100.0 %
Total operating expense 25,663 13,697 11,966 87.4 %
Operating loss (25,663) (13,697) (11,966) (87.4) %
Investment and other income (expense), net 489 213 276 129.6 %
Interest expense (1,929) (3,259) 1,330 40.8 %
Loss before income taxes (27,103) (16,743) (10,360) (61.9) %
Income tax benefit (5,101) (5,040) (61) (1.2) %
Net loss $ (22,002) $ (11,703) $ (10,299) (88.0) %
Net loss per share - diluted $ (0.38) $ (0.20) $ (0.18) (90.0) %

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~~The following is a summary of our financial results (in thousands, except per share amounts) for the nine months ended September 30, 2021 and 2020, respectively:~~

Nine Months Ended September 30, Change
2021 vs. 2020
Comparative Statements of (Loss) Income 2021 2020 $ %
Product sales $ — $ 22,334 $ (22,334) (100.0) %
Operating expenses:
Cost of products — 5,742 (5,742) (100.0) %
Research and development expenses 14,994 15,156 (162) (1.1) %
Selling, general and administrative expenses 47,469 23,431 24,038 102.6 %
Intangible asset amortization — 406 (406) (100.0) %
Changes in fair value of contingent consideration — 3,327 (3,327) (100.0) %
Gain on sale of Hospital Products — (45,760) 45,760 100.0 %
Restructuring income (53) (43) (10) (23.3) %
Total operating expense 62,410 2,259 60,151 2,662.7 %
Operating (loss) income (62,410) 20,075 (82,485) (410.9) %
Investment and other income (expense), net 1,531 (906) 2,437 269.0 %
Interest expense (5,788) (9,686) 3,898 40.2 %
Gain from release of certain liabilities 166 — 166 100.0 %
Other expense - changes in fair value of contingent consideration payable — (435) 435 100.0 %
(Loss) income before income taxes (66,501) 9,048 (75,549) (835.0) %
Income tax benefit (11,473) (9,258) (2,215) (23.9) %
Net (loss) income $ (55,028) $ 18,306 $ (73,334) (400.6) %
Net (loss) income per share - diluted $ (0.94) $ 0.35 $ (1.29) (368.6) %



	Three Months Ended March 31,				Change
					2022 vs. 2021
Comparative Statements of Loss	2022		2021		$		%


Operating expenses:

Research and development expenses	$	6,991	$	3,852	$	3,139	81.5	%
Selling, general and administrative expenses	21,635		11,012		10,623		96.5	%
Restructuring income	—		(53)		53		100.0	%
Total operating expense	28,626		14,811		13,815		93.3	%
Operating loss	(28,626)		(14,811)		(13,815)		(93.3)	%
Investment and other (expense) income, net	(137)		610		(747)		(122.5)	%
Interest expense	(2,017)		(1,929)		(88)		(4.6)	%
Gain from release of certain liabilities	33		78		(45)		(57.7)	%
Loss before income taxes	(30,747)		(16,052)		(14,695)		(91.5)	%
Income tax benefit	(4,323)		(2,607)		(1,716)		(65.8)	%
Net loss	$	(26,424)	$	(13,445)	$	(12,979)	(96.5)	%
Net loss per share - diluted	$	(0.45)	$	(0.23)	$	(0.22)	(95.7)	%

On June 30, 2020, we announced the sale of the Hospital Products, including our three commercial products, Akovaz, Bloxiverz and Vazculep, as well as Nouress, to the Exela Buyer. As a result of the sale, the Company no longer recorded revenue, cost of products, intangible amortization and changes to the fair value of the contingent consideration related to these products subsequent to the Closing Date.


		Three Months Ended September 30,						Change							Three Months Ended March 31,						Change
							2021 vs. 2020													2022 vs. 2021
Research and Development Expenses:	Research and Development Expenses:			2021			2020			$			%	Research and Development Expenses:			2022			2021			$			%

Research and development expenses	Research and development expenses	$	4,380		$	5,569		$	(1,189)		(21.4)	%	Research and development expenses		$	6,991		$	3,852		$	3,139		81.5	%

Research and development expenses ~~decreased $1,189~~increased $3,139 or ~~21.4%~~81.5% during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020.~~the prior year. This ~~decrease~~increase was driven by ~~lower clinical studies expense as well as lower purchases of~~higher active pharmaceutical ingredients ~~used in the research and development of FT218~~(“API”) purchases during the current period ~~when compared to the prior comparable period.~~of approximately $3,100.

Nine Months Ended September 30, Change
2021 vs. 2020
Research and Development Expenses: 2021 2020 $ %
Research and development expenses $ 14,994 $ 15,156 $ (162) (1.1) %



	Three Months Ended March 31,				Change
					2022 vs. 2021
Selling, General and Administrative Expenses:	2022		2021		$		%

Selling, general and administrative expenses	$	21,635	$	11,012	$	10,623	96.5	%

~~Research~~Selling, general and ~~development~~administrative expenses ~~decreased $162~~increased $10,623 or ~~1.1%~~96.5% during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020. This decrease was driven by lower clinical studies expense due to~~ the ~~completion of the FT218 clinical study during the nine months ended September 30, 2020, offset by higher pre-NDA approval activities.~~

~~- 29 -~~

Three Months Ended September 30, Change
2021 vs. 2020
Selling, General and Administrative Expenses: 2021 2020 $ %
Selling, general and administrative expenses $ 21,283 $ 8,423 $ 12,860 152.7 %

~~Selling, general and administrative (“SG&A”) expenses increased $12,860 or 152.7% during the three months ended September 30, 2021 as compared to the same~~ prior year, ~~period,~~ driven by the Company’s continued commercial preparations and launch readiness activities for potential approval of FT218. These activities included an increase in marketing and market research costs of approximately $4,400, an increase in other launch planning and preparation activities totaling $1,400 and an increase in patient education costs of approximately $400. Compensation costs increased by approximately $3,600 due to an increase in headcount, primarily in commercial and medical affairs. Legal, other professional fees and insurance costs increased by approximately $2,700.

Nine Months Ended September 30, Change
2021 vs. 2020
Selling, General and Administrative Expenses: 2021 2020 $ %
Selling, general and administrative expenses $ 47,469 $ 23,431 $ 24,038 102.6 %

~~SG&A expenses increased $24,038 or 102.6% during the nine months ended September 30, 2021 as compared to the same prior year period, driven by the Company’s~~our continued commercial preparations and launch readiness activities for potential approval of FT218. These activities included an increase in marketing and market research activities of approximately ~~$8,300, and an increase in other launch planning and preparation activities totaling approximately $3,600.~~$3,400. Compensation costs increased by approximately ~~$6,800~~$3,700 due to an increase in headcount, primarily in commercial and medical affairs. ~~Legal, other~~Other professional fees ~~and insurance costs~~ increased by approximately ~~$4,800.~~$3,500.

Three Months Ended September 30, Change
2021 vs. 2020
Investment and Other Income (Expense), net 2021 2020 $ %
Investment and other income (expense), net $ 489 $ 213 $ 276 129.6 %



	Three Months Ended March 31,				Change
					2022 vs. 2021
Investment and Other (Expense) Income, net	2022		2021		$		%

Investment and other (expense) income, net	$	(137)	$	610	$	(747)	(122.5)	%

Investment and other (expense) income, ~~(expense),~~ net ~~increased for~~decreased $747 or 122.5% during the three months ended ~~September 30, 2021 when~~March 31, 2022 as compared to the same period in the prior ~~year~~year. This decrease was driven by higher ~~foreign currency gains.~~

Nine Months Ended September 30, Change
2021 vs. 2020
Investment and Other Income (Expense), net 2021 2020 $ %
Investment and other income (expense), net $ 1,531 $ (906) $ 2,437 269.0 %

~~Investment and other income (expense),~~ net increased for the nine months ended September 30, 2021 when compared to the same period in the prior year driven by an $800 legal settlement related to a bankruptcy claim recognized in the prior period, higher foreign currency gains of approximately $700, higher interest income of approximately $600 and lower realized losses on our marketable securities of approximately ~~$400.~~

$500 and lower foreign currency gains of approximately $300.

- 3024 -

Three Months Ended September 30, Change
2021 vs. 2020
Interest Expense 2021 2020 $ %
Interest expense $ 1,929 $ 3,259 $ (1,330) (40.8) %

Interest expense of $1,929 and $3,259 for the three months ended September 30, 2021 and 2020, respectively, is related to interest on the 2023 Notes. Included in these amounts are coupon interest expense of $1,617 for each period and the amortization of debt issuance costs of $312 and $250 for the three months ended September 30, 2021 and 2020, respectively. Prior period interest expense also included amortization of a debt discount of $1,392, which is no longer recognized upon our adoption of ASU 2020-06. See ~~Note 9: Long Term Debt~~ ~~to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for further details for further details.~~

Nine Months Ended September 30, Change
2021 vs. 2020
Interest Expense 2021 2020 $ %
Interest expense $ 5,788 $ 9,686 $ (3,898) (40.2) %

Interest expense of $5,788 and $9,686 for the nine months ended September 30, 2021 and 2020, respectively, is related to interest on the 2023 Notes. Included in these amounts are coupon interest expense of $4,851 for each period and the amortization of debt issuance costs of $937 and $744 for the nine months ended September 30, 2021 and 2020, respectively. Prior period interest expense also included amortization of a debt discount of $4,091, which is no longer recognized upon our adoption of ASU 2020-06. See ~~Note 9: Long Term Debt~~ ~~to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for further details for further details.~~


		Three Months Ended September 30,								Change							Three Months Ended March 31,								Change
									2021 vs. 2020															2022 vs. 2021
Income Tax Benefit:	Income Tax Benefit:				2021				2020			$			%	Income Tax Benefit:				2022				2021			$			%

Income tax benefit	Income tax benefit	$	(5,101)			$	(5,040)			$	(61)		(1.2)	%	Income tax benefit		$	(4,323)			$	(2,607)			$	(1,716)		(65.8)	%
Percentage of (loss) income before income taxes		18.8		%		30.1		%
Percentage of loss before income taxes															Percentage of loss before income taxes		14.1		%		16.2		%

The income tax benefit was ~~$5,101~~$4,323 for the three months ended ~~September 30,~~March 31, 2022 resulting in an effective tax rate of 14.1%. The income tax benefit was $2,607 for the three months ended March 31, 2021 resulting in an effective tax rate of ~~18.8%~~16.2%. The increase in the income tax benefit ~~was $5,040~~ for the three months ended September 30, 2020 resulting in an effective tax rate of 30.1%. The decrease in the effective tax rate for the three months ended September 30, 2021, when compared to the same period in 2020, is primarily attributable to a change in the mix of losses in our foreign entities.

Nine Months Ended September 30, Change
2021 vs. 2020
Income Tax Benefit: 2021 2020 $ %
Income tax benefit $ (11,473) $ (9,258) $ (2,215) (23.9) %
Percentage of (loss) income before income taxes 17.3 % (102.3) %

The income tax benefit was $11,473 for the nine months ended September 30, 2021 resulting in an effective tax rate of 17.3%. The income tax benefit was $9,258 for the nine months ended September 30, 2020 resulting in an effective tax rate of (102.3)%. The net increase in the effective income tax rate for the nine months ended September 30, 2021March 31, 2022 as compared to the prior period in ~~2020~~2021 is primarily due to an increase in net operating losses recognized in the discrete tax benefits recognized during the nine months ended September 30, 2020 under the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, which did not occur during the nine months ended September 30, 2021.United States.

~~- 31 -~~

Liquidity and Capital Resources

~~The Company’s~~

Our cash flows from operating, investing and financing activities, as reflected in the unaudited condensed consolidated statements of cash flows, are summarized in the following table:

Nine Months Ended September 30, Change
2021 vs. 2020
Net cash (used in) provided by: 2021 2020 $ %
Operating activities $ (54,804) $ (29,609) $ (25,195) (85.1) %
Investing activities 41,609 (76,962) 118,571 154.1 %
Financing activities 263 179,500 (179,237) (99.9) %



	Three Months Ended March 31,				Change
					2022 vs. 2021
Net cash (used in) provided by:	2022		2021		$		%

Operating activities	$	(34,045)	$	(23,413)	$	(10,632)	(45.4)	%
Investing activities	42,251		11,191		31,060		277.5	%
Financing activities	2,009		149		1,860		1,248.3	%

Operating Activities

Net cash used in operating activities was ~~$54,804~~$34,045 and ~~$29,609~~$23,413 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Net cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was driven by net loss of ~~$55,028~~$26,424 and ~~non-cash adjustments of $2,793, offset by favorable~~unfavorable changes in working capital of ~~$3,017.~~$7,043, offset by favorable non-cash adjustments of $578. For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used in operating activities was driven by net ~~income~~loss of ~~$18,306 and favorable non-cash adjustments of $7,323, offset by the $45,760 gain recorded for the sale of the Hospital Products~~$13,445 and a ~~$9,478~~$10,175 unfavorable change in working capital. The ~~year over year~~March 31, 2022 net unfavorable change in working capital ~~is driven by~~was less than the ~~sale~~March 31, 2021 net unfavorable change in working capital mainly due to timing of ~~the Hospital Products on June 30, 2020, as well as increased~~receipt and payment of trade payables and accrued expenses ~~in 2021 as a result of the Company’s~~associated with continued commercial preparations and launch readiness activities for potential approval of FT218.

Investing Activities

Net cash provided by investing activities was ~~$41,609~~$42,251 and $11,191 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and net cash used in investing activities was $76,962 for the nine months ended September 30, 2020.~~respectively. Net cash provided by investing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~driven by proceeds from the disposition of the Hospital Products of $16,500, as well as~~due to net proceeds received from the excess of sales over purchases of marketable securities of ~~$25,135.~~$42,251. Net cash ~~used in~~provided by investing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was driven by ~~net purchases of marketable securities of $94,179, partially offset by the~~ proceeds from the disposition of the ~~Hospital Products~~hospital products of ~~$17,250.~~$8,250, as well as higher net proceeds received from the excess of sales over purchases of marketable securities.

Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$263~~$2,009 related to proceeds from stock option exercises and employee ~~stock~~share purchase plan (“ESPP”) issuances. Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 of ~~$179,500 is driven by the February 2020 private placement and May 2020 public offering that resulted in net~~$149 related to proceeds ~~of $60,570 and $116,924, respectively, as well as~~from stock option exercises and ESPP ~~issuances of $2,006.~~issuances.

~~Liquidity and~~ Risk Management

The adequacy of our cash resources depends on the outcome of certain business conditions including the cost of our FT218 clinical development ~~plan,~~and commercial launch plans, our cost structure, and other factors set forth in “Risk Factors” within Part I, Item 1A of our Annual Report on Form 10-K filed with the ~~2020 Form 10-K.~~SEC on March 16, 2022. To complete the FT218 clinical development and ~~commercialization plan~~commercial launch plans we will need to commit substantial resources, which could result in future losses or otherwise limit our opportunities or affect our ability to operate our business. Our assumptions concerning the outcome of certain business conditions may prove to be wrong or other factors may adversely affect our business, and as a result we could

- 25 -

exhaust or significantly decrease our available cash and marketable securities balances which could, among other things, force us to raise additional funds and/or force us to reduce our expenses, either of which could have a material adverse effect on our business. Additionally, we are unable to estimate the near or long term ~~impact~~impacts of COVID-19 and inflation, which may have a material adverse impact on our business.

If available to us, raising additional capital may be accomplished through one or more public or private debt or equity financings, royalty financings or collaborations or partnering arrangements. Any equity financing would be dilutive to our shareholders.

~~- 32 -~~

Cash, cash equivalent and marketable security balances as of ~~September 30, 2021~~March 31, 2022 and unused financing sources are expected to provide us with the flexibility to meet our liquidity needs ~~in 2021,~~through March 31, 2023, including ~~its~~ operating requirements related to the ~~development~~commercial launch of FT218.

Other Matters

~~Litigation~~

~~The Company is~~Litigation

We are subject to potential liabilities generally incidental to our business arising out of present and future lawsuits and claims related to product liability, personal injury, contract, commercial, intellectual property, tax, employment, compliance and other matters that arise in the ordinary course of business. ~~The Company accrues~~We accrue for potential liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were no contingent liabilities with respect to any litigation, arbitration or administrative or other proceeding that are reasonably likely to have a material adverse effect on ~~the Company’s unaudited condensed~~our consolidated financial position, results of operations, cash flows or liquidity.

~~First Complaint~~

~~On October 18, 2021, consistent with the scheduling order, Jazz filed a status update with the Court indicating that Jazz did not intend to file a preliminary injunction with the Court at this time.Jazz further indicated that it would provide the Court with an update regarding whether preliminary injunction proceedings may be necessary after receiving further~~ For information regarding ~~the FDA’s action on Avadel’s NDA.~~legal proceedings we are involved in, see

~~Second Complaint~~

~~On October 22, 2021, the Court issued an oral order stating that this case should proceed on the same schedule as the case filed on May 12, 2021.~~

~~- 33 -~~

~~Material~~Note 9: Commitments and ~~Contractual Obligations~~

~~Disclosures regarding material commitments~~Contingencies - Litigation and ~~contractual obligations are included in Part II, Item 7 of the Company’s Form 10-K and updated in~~Note 10: Subsequent Events - Jazz Litigation ~~Note 16: Commitments and Contingencies~~to ~~the Company’s~~our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report ~~is incorporated by reference herein.~~on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

~~The Company is~~

We are subject to interest rate risk as a result of its portfolio of marketable securities. The primary objectives of our investment policy are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and competitive yield. Although our investments are subject to market risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or certain types of investment. Our investment policy allows us to maintain a portfolio of cash equivalents and marketable securities in a variety of instruments, including U.S. federal government and federal agency securities, European Government bonds, corporate bonds or commercial paper issued by U.S. or European corporations, money market instruments, certain qualifying money market mutual funds, certain repurchase agreements, tax-exempt obligations of states, agencies, and municipalities in the U.S and Europe, and equities. A hypothetical 50 basis point change in interest rates would not result in a material decrease or increase in the fair value of our securities due to the general short-term nature of our investment portfolio.

Foreign Exchange Risk

We are exposed to foreign currency exchange risk as the functional currency financial statements of a non-U.S. subsidiary is translated to U.S. dollars. The assets and liabilities of this non-U.S. subsidiary having a functional currency other than the U.S. dollar is translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of this non-U.S. subsidiary will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar. Our primary currency translation exposure is related to one subsidiary that has functional currencies denominated in euro. A 10% strengthening/weakening in the rates used to translate the results of our non-U.S. subsidiaries that have functional currencies denominated in euro as of March 31, 2022 would have had an immaterial impact on net loss for the quarter ended March 31, 2022.

Transactional exposure arises where transactions occur in currencies other than the functional currency. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the

- 26 -

resulting gains and losses are reported in investment and other (expense) income, net in the condensed consolidated statements of loss. As of March 31, 2022, our primary exposure is to transaction risk related to euro net monetary assets and liabilities held by subsidiaries with a U.S. dollar functional currency. Realized and unrealized foreign exchange gains resulting from transactional exposure were immaterial for the quarter ended March 31, 2022.

Inflation Risk

Inflation generally affects us by increasing our costs of labor and supplies and the costs of our third-parties we rely on for the development, manufacture and supply of our product candidates. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the quarter ended March 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~September 30, 2021,~~March 31, 2022, the end of the period covered by this ~~quarterly report~~Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act ~~of 1934, as amended)~~ were not effective ~~as of September 30, 2021.~~ due to the material weakness in our internal control over financial reporting described below.

Material Weakness

Remediation Plans

As previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, management had identified a material weakness in the Company’s internal controls over financial reporting specifically related to its February 2023 Notes indenture. The Company is committed to maintaining a strong internal control environment and have implemented measures designed to ensure that the control deficiency contributing to the material weakness is remediated. In the first quarter of 2022, management implemented a remediation plan that included the adoption of additional control procedures surrounding timely and periodic evaluation of all terms of the Company’s debt agreements and the associated calculation of interest expense in accordance with the terms of any such debt agreement. Management believes these additional internal controls and procedures will ensure the completeness and accuracy of the calculation and timely payment of interest expense, classification of debt and compliance with terms of the Company’s debt agreements.

With the Exchange Transaction on April 5, 2022, the Company performed the evaluation of all terms of the Company’s updated debt agreements. The material weakness will be fully remediated when the Company has determined, through testing, that these controls have operated effectively for a sufficient period of time.

Other Changes in Internal ~~Control over Financial Reporting~~Controls

~~There~~Other than the above noted remediation activity, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during the three months ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

- 27 -

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The information contained in Note ~~16:~~9: Commitments and Contingencies - Litigation and Note 10: Subsequent Events - Jazz Litigation to the Company’s unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.

ITEM 1A. RISK FACTORS.

Except as set forth below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on March ~~9, 2021.~~16, 2022.

~~Our product candidate~~If our competitors develop and ~~future product candidates, if approved by the FDA,~~market technologies or products that are safer, more effective or less costly than ours, or obtain regulatory approval and market such products before we do, our commercial opportunity may ~~not obtain desired regulatory exclusivities, including orphan drug exclusivity~~.be diminished or eliminated.

Under the Orphan Drug Act, as amended, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a patient population of fewer than 200,000 individualsCompetition in the ~~United States, or a patient population greater than 200,000 where there is no reasonable expectation that the cost of developing the drug for the rare~~

~~- 34 -~~

disease or condition will be recovered from sales of the drug in the United States. Generally, if a drug with orphan drug designation subsequently receives the first marketing approval for the disease or condition for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same drug for the same disease or condition for seven years, except in limited circumstances, such as if the FDA concludes that a subsequent same drug is clinically superior through greater safety, greater effectiveness, or a major contribution to patient care. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

Although our lead product candidate, FT218, obtained orphan drug designation for the treatment of narcolepsy from the FDA in January 2018, there is no guarantee that we will obtain approval or orphan drug exclusivity for FT218. Orphan drug designation does not give a product candidate any advantage in, or shorten the timeline for, the FDA regulatory review and approval process. In addition, because FT218 would not be the first sodium oxybate product to be approved for the treatment of narcolepsy, we must demonstrate that FT218 is clinically superior to any previously approved same drug in order to obtain orphan drug exclusivity for FT218, and we may be required to demonstrate clinical superiority for the approval and exclusivity of other product candidates in the future. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Moreover, any orphan drug exclusive marketing rights may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantity of the drug to meet the needs of patients with the particular rare disease or condition. The FDA may reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

~~Our product candidate and future product candidates will generally be subject to regulatory approval. If we or our~~ pharmaceutical and biotechnology ~~company partners do not obtain such approvals, or if such approvals are delayed, our ability~~industry is intense and is expected to ~~generate future revenues may be adversely affected.~~

~~Our lead product candidate, FT218, as well as product candidates we may wish to market in the future, may not gain regulatory approval and reach the commercial market for a variety of reasons.~~increase. We submitted a 505(b)(2) NDA, for FT218 in December 2020. In February 2021, the FDA assigned the NDA a PDUFA target action date of October 15, 2021 and in October 2021, the FDA notified us that its review of the FT218 NDA was still ongoing.

~~In the U.S., federal, state and local government agencies, primarily the FDA, regulate all pharmaceutical products, including existing products and those under development. Neither we nor our~~compete with other pharmaceutical and biotechnology partners can control whether we obtain regulatory approval for any of these products or, if obtained, the timing thereof. There may be significant delays in expected product releases while attempting to obtain regulatory approval for products incorporating our technologies. If we or our partners are not successful in timely obtaining such approvals, our revenues and profitability may decline.

Applicants for FDA approval often must submit to the FDA extensive clinical and pre-clinical data, as well as information about product manufacturing processes and facilities and other supporting information. Varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a drug product. The FDA also may require us, or our partners to conduct additional pre-clinical studies or clinical trials.

Similarly, although we have submitted a 505(b)(2) NDA for our sodium oxybate candidate and anticipate submitting applications for approval for our development products that rely on existing data to demonstrate safety and effectiveness, the FDA may determine that additional studies particular to our product candidate and future product candidates are necessary. If the FDA requires such additional studies, it would impact development plans for those products.

Changes in law or FDA’s policies during the development period or regulatory review of each submitted new product application, also may delay an approval, result in a narrower approved use or result in rejection of an application. For instance, under the Food and Drug Administration Amendments Act (“FDAAA”), we or our partners may be required to develop Risk Evaluation and Mitigation Strategies (“REMS”) to ensure the safe use of our lead product candidate. If the FDA disagrees with such REMS proposals, it may be more difficult and costly to obtain regulatory approval for our lead product candidate. Similarly, FDAAA provisions may make it more likely that the FDA will refer a marketing application for a new product to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. This review may add to the time for approval, and, although the FDA is not bound by the recommendation of an advisory committee, objections or concerns expressed by an advisory committee may cause the FDA to delay or deny approval.companies.

The ~~FDA has substantial discretion~~introduction of new products in the ~~approval process~~U.S. market that compete with, or otherwise disrupt the market for, FT218, if approved, would adversely affect sales of our product candidate. For example, in the future, we expect FT218 to face competition from manufacturers of generic twice-nightly sodium oxybate formulations who have reached settlement agreements with the current brand product marketer. Hikma Pharmaceuticals is expected to launch an authorized generic version of twice-nightly sodium oxybate in 2023 or earlier, depending on certain circumstances. There are other potential future competitive products that could impact the marketplace who have reached settlement agreements with the current brand product marketer, which allows for entry of other authorized generics in 2023 and ~~may disagree with our~~other generic products in 2026, or ~~our partners’ interpretations of data and information submitted in an application, which also~~earlier for both under certain circumstances. Beyond generics, there are other potential future competitive products that could ~~cause delays of an approval or rejection of an application. Even if~~impact the narcolepsy treatment marketplace.

If the FDA approves a competitor’s application for a product ~~the approval may limit the uses or indications~~candidate before our application for ~~which the product may be marketed, restrict distribution of the product or require further studies.~~

~~- 35 -~~

The FDA may also withdraw product approvals for failure to comply with regulatory requirements or if problems follow initial marketing. In the same way, medicinal products for supply on the EU market are subject to marketing authorization by either the European Commission, following an opinion by the European Medicines Agency (“EMA”), or by the competent authorities of EU Member States. Applicants for marketing authorization must submit extensive technical and clinical data essentially in the form of the ICH Common Technical Document. The data is subject to extensive review by the competent authorities, and after such review the data may be considered inappropriate or insufficient. If applications for marketing authorization by pharmaceutical and biotechnology company partners are delayed or rejected, if the therapeutic indications for which the product is approved are limited, or if conditional marketing authorization imposing post-marketing clinical trials or surveillance is imposed, our revenues, operating results and liquidity may decline and earnings may be negatively impacted.

~~Our~~a similar product candidate, and ~~future product candidates may not reach the commercial market for~~grants such competitor a ~~number~~period of ~~reasons.~~

Drug development is an inherently uncertain process with a high risk of failure at every stage of development. Successful R&D of pharmaceutical products is difficult, expensive and time consuming. Many product candidates fail to reach the market. Our success will depend on the development and the successful commercialization of new drugs and products that utilize our drug delivery technologies.

Even if our product candidates and current drug delivery technologies appear promising during development, there may not be successful commercial applications developed for them for a number of reasons, including:

•the FDA, the EMA, the competent authority of an EU Member State or an Institutional Review Board (“IRB”), or an Ethics Committee (EU equivalent to IRB), or our partners may delay or halt applicable clinical trials;

•~~we or our partners may face slower than expected rate of patient recruitment and enrollment in clinical trials, or may devote insufficient funding to the clinical trials;~~

•~~our drug delivery technologies and drug products may be found to be ineffective or to cause harmful side effects, or may fail during any stage of pre-clinical testing or clinical trials;~~

•~~we or our partners may find that certain products cannot be manufactured on a commercial scale and, therefore, may not be economical or feasible to produce;~~

•we or our partners may face delays in completing our clinical trials due to circumstances outside of our control, including natural disasters, labor or civil unrest, global health concerns or pandemics or acts of war or terrorism;

•exclusivity, the FDA may ~~determine~~take the position that ~~we have identified the wrong listed drug or drugs or that approval of~~it cannot approve our 505(b)(2) application for our sodium oxybate candidate or future product candidates is blocked by patent or non-patent exclusivity of the listed drug or drugs or of other previously approved drugs with the same conditions of approval as any of our product candidates (as applicable); or

•~~our~~a similar product candidate ~~and future product candidates could fail to obtain regulatory approval or,~~until the exclusivity period expires. Additionally, even if approved, could fail to achieve market acceptance, could fail to be included within the pricing and reimbursement schemes of the U.S. or EU Member States, or could be precluded from commercialization by proprietary rights of third parties.

Disruptions at the FDA, the U.S. Drug Enforcement Administration and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our ~~business may rely, which could negatively impact our business.~~

As of May 26, 2021, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals and conducting mission critical U.S. and non-U.S. inspections to ensure compliance of manufacturing facilities with FDA quality standards. However, the FDA may not be able to maintain its current pace and approval timelines could be extended due to the ongoing COVID-19 pandemic. In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. We cannot guarantee

~~- 36 -~~

~~that the FDA will be able to complete any required inspections or take other necessary actions in respect to our product candidate or future product candidates.~~

Third parties may claim that our product candidate or future product candidates infringe their rights, and we may incur significant costs resolving these claims. Additionally, legal proceedings related to such claims could materially delay or otherwise adversely affect commercialization plans related to our product candidate, if approved.

Third parties may claim infringement of their patents and other intellectual property rights by the manufacture, use, import, offer for sale or sale of our drug delivery technologies or our other products. For example, in connection with us seeking regulatory approval505(b)(2) application for a product candidate is approved first, and we receive a ~~third party~~period of statutory marketing exclusivity, we may ~~allege~~still be subject to competition from other companies with approved products or approved 505(b)(2) NDAs for different conditions of use that ~~our product candidate infringes its patents or other intellectual property rights and file suit~~would not be restricted by a grant of exclusivity to ~~delay/prevent regulatory approval and/or commercialization of such product.~~us.

~~In May 2021, Jazz Pharmaceuticals filed a complaint against us and certain~~Many of our ~~subsidiaries in the United States District Court for the District~~competitors have substantially greater financial, technological, manufacturing, marketing, managerial and research and development resources and experience than we do. Furthermore, acquisitions of ~~Delaware alleging infringement of certain of its patents.~~

In response to any claim of infringement, we may choose or be forced to seek licenses, defend infringement actions or challenge the validity or enforceability of those patent rights in court or administrative proceedings. If we cannot obtain required licenses on commercially reasonably terms, or at all, are found liable for infringement or are not able to have such patent rights declared invalid or unenforceable,competing companies by large pharmaceutical companies could enhance our business could be materially harmed. We may be subject to claims (and even held liable) for significant monetary damages (including enhanced damages and/or attorneys’ fees), encounter significant delays in bringing products to market or be precluded from the manufacture, use, import, offer for sale or sale of products or methods of drug delivery covered by the patents of others. Even if a license is available, it may not be available on commercially reasonable terms or may be non-exclusive, which could result incompetitors’ resources. Accordingly, our competitors ~~gaining access to the same intellectual property. We may not have identified, or be able to identify in the future, U.S. or non-U.S. patents that pose a risk of potential infringement claims.~~

In addition to the possibility of intellectual property infringement claims, a third party could submit a citizen petition to the FDA requesting relief that, if granted, could materially adversely affect the NDA and/or underlying product candidate. For example, such a third-party petition could, if granted, materially adversely affect the likelihood and/or timing of NDA approval, content of final product labeling, and/or resulting regulatory exclusivity (if any) for such product.

~~Parties making claims against us~~ may be able to ~~sustain the costs of patent litigation~~develop, obtain regulatory approval and gain market share for their products more ~~effectively~~rapidly than we can because they have substantially greater resources. In addition, any claims, with or without merit, that our product candidate, future product candidates or drug delivery technologies infringe proprietary rights of third parties could be time-consuming, result in costly litigation or divert the efforts of our technical and management personnel, any of which could disrupt our relationships with our partners and could significantly harm our financial positions and operating results.us.

We currently depend on a single third party manufacturer and a single third party supplier of raw materials related to the development of our product candidate and any interruption of operations of either such provider could significantly delay or have a material adverse effect on our business.

Currently, we use a single supplier of raw materials and a single manufacturer of clinical materials. If FT218 is approved, we anticipate using the same third party manufacturer for commercial supply of FT218. If the supplies or manufacture of these products or materials were interrupted for any reason, including but not limited to, quality issues, natural disasters, labor or civil unrest, global health concerns or pandemics or acts of war or terrorism, the manufacturing and supply of FT218 could be delayed. If the supplies of these materials were interrupted for any reason, our manufacturing of our lead product candidate could be delayed. These delays could be extensive and expensive, especially in situations where a substitution was not readily available or required variations of existing regulatory approvals and certifications or additional regulatory approval. For example, an alternative supplier may be required to pass an inspection by the FDA, EMA or the competent authorities of EU Member States for compliance with current cGMP, requirements before supplying us with product or before we may incorporate that supplier’s ingredients into the manufacturing of our product candidate by our contract, development, and manufacturing organizations (“CDMOs”). Additionally, as a result of any such delays in either the supply or manufacturing, we may be unable to meet our projected needs for clinical supplies to support our activities through commercial manufacturing, if approved, and we may not be able to market or distribute FT218, if approved, on our expected timeline, or at all. Failure to obtain adequate supplies in a timely manner could have a material adverse effect on our business, financial condition and results of operations. While we plan to engage with additional suppliers and manufacturers for the supply of commercial batches for FT218, if approved, there can be no guarantee we will establish appropriate arrangements on acceptable terms, if at all.

~~- 37 -~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

- 28 -

ITEM 6. EXHIBITS.


Exhibit No.						Description

4.1						Indenture, dated as of April 4, 2022, by and between Avadel Finance Cayman Limited, the Company and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-37977) filed with the SEC on April 5, 2022)
4.2						Form of 4.50% Exchangeable Senior Note due 2023 (included in Exhibit 4.1, which is incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-37977) filed with the SEC on April 5, 2022)
10.1						Form of Exchange Agreement by and between Avadel Finance Cayman Limited, the Company and certain holders of the February 2023 Notes (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37977) filed with the SEC on March 16, 2022)
31.1*						Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) promulgated under the Exchange Act
31.2*						Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) promulgated under the Exchange Act
32.1**						Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH*						Inline XBRL Taxonomy Extension Schema Document
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~104*						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) ~~(filed herewith)~~

______________________

* Filed herewith.

** Furnished herewith.

~~+ Indicates management contract or compensatory plan or arrangement.~~

- 3829 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AVADEL PHARMACEUTICALS PLC
	(Registrant)

Date: ~~November 8, 2021~~May 9, 2022	By:	/s/ Gregory J. Divis
		Gregory J. Divis
		Chief Executive Officer
		(Duly Authorized Officer and Principal Executive Officer)





Date: ~~November 8, 2021~~May 9, 2022	By:	/s/ Thomas S. McHugh
		Thomas S. McHugh
		Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

- 3930 -


		Page #
Cautionary Note Regarding Forward Looking Statements		3

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2420
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3426
Item 4.	Controls and Procedures	3427

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3428
Item 1A.	Risk Factors	3428
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3828
Item 3.	Defaults Upon Senior Securities	3828
Item 4.	Mine Safety Disclosures	3828
Item 5.	Other Information	3828
Item 6.	Exhibits	3829


	Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
	Nine Months Ended September 30, 2020
	As Reported		Pro Forma Adjustments		Notes	Pro Forma


Product sales	$	22,334	$	(22,175)	(a)	$	159










Total operating expense	2,259		(8,489)		(b)	(6,230)
Operating income (loss)	20,075		(13,686)			6,389





Income (loss) before income taxes	$	9,048	$	(13,251)	(c)	$	(4,203)


	As of September 30, 2021						As of December 31, 2020
Fair Value Measurements:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Marketable securities (see Note 6)

Mutual and money market funds	$	88,568	$	—	$	—	$	104,672	$	—	$	—
Corporate bonds	—		19,071		—		—		22,155		—
Government securities - U.S.	—		13,462		—		—		18,999		—

Other fixed-income securities	—		1,823		—		—		3,854		—

Total assets	$	88,568	$	34,356	$	—	$	104,672	$	45,008	$	—