RVL Pharmaceuticals : 2022 Irish Statutory Financial Statements

RVL Pharmaceuticals plc

Directors' Report, Consolidated Financial Statements and Parent Company Financial Statements

Financial Year Ended 31 December 2022

RVL Pharmaceuticals plc	Directors' Report and Financial Statement 2021
CONTENTS
			Page
DIRECTORS' REPORT		2	- 56
INDEPENDENT AUDITOR'S REPORT		57	- 63
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS	64 - 65
CONSOLIDATED BALANCE SHEET		66	- 67
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY		68
CONSOLIDATED STATEMENT OF CASH FLOWS		69 - 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	71 - 105
PARENT COMPANY BALANCE SHEET			106
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY		107
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS	108 - 115

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RVL Pharmaceuticals plc

DIRECTORS' REPORT

The directors present their report together with the consolidated group financial statements and parent company financial statements of the Company (as defined below) for the financial year ended December 31, 2022.

Principal activities and nature of operations

RVL Pharmaceuticals plc, an Irish public limited company (the "Parent Company"), together with its subsidiaries (the "Company" or the "consolidated group"), is a specialty pharmaceutical company focused on the development and commercialisation of products that target markets with underserved patient populations in the ocular medicine and medical aesthetics therapeutic areas.

In July 2020, we received regulatory approval from the United States ("U.S.") Food and Drug Administration ("FDA") for RVL-1201, or Upneeq, (oxymetazoline hydrocholoride ophthalmic solution), 0.1%, for the treatment of acquired blepharoptosis, or droopy or low-lying eyelids, in adults. Upneeq was commercially launched in September 2020 to a limited number of eye care professionals with commercialisation operations expanded in 2021 among ophthalmology, optometry and oculoplastic specialties. In February 2022, Upneeq was commercially expanded into the medical aesthetics market in the U.S.

On August 27, 2021, we announced the closing of the divestiture of our portfolio of branded and non-promoted products and our Marietta, Georgia, manufacturing facility (collectively, the "Legacy Business"), to certain affiliates of Alora Pharmaceuticals, LLC ("Alora") for $111 million in cash upon closing, subject to certain post- closing adjustments, and up to $60 million in contingent milestone payments. Pursuant to the divestiture, we retained the rights to Upneeq and to arbaclofen extended release ("ER") tablets, which is under development for the treatment of spasticity in multiple sclerosis. During the year ended December 31, 2022, we received an aggregate of $5.0 million in cash from Alora related to contingent milestone payments earned in connection with the sale of the Legacy Business.

With the divestiture of the Legacy Business, our commercial operations are conducted by our wholly-owned subsidiary, RVL Pharmaceuticals, Inc. and its subsidiary RVL Pharmacy, LLC ("RVL Pharmacy"). RVL Pharmacy exclusively conducts pharmacy operations dedicated to the processing and fulfilment of prescriptions for Upneeq.

Following the divestiture of the Legacy Business, we are exploring opportunities to sell or out-licence our late- stage product candidate arbaclofen ER tablets designed for the alleviation of signs and symptoms of spasticity resulting from multiple sclerosis for which we have completed Phase III clinical trials.

On January 14, 2022, we changed our name from Osmotica Pharmaceuticals plc to RVL Pharmaceuticals plc and our ordinary shares began trading under the symbol "RVLP."

Unless otherwise indicated or required by the context, references throughout to "RVL," or the "Company," refer to the Company's continuing operations following the sale of its Legacy Business.

Basis of presentation

The directors have elected to prepare the consolidated financial statements in accordance with Section 279 of the Companies Act 2014, which provides that a true and fair view of the assets and liabilities, financial position and profit or loss may be given by preparing the consolidated financial statements in accordance with U.S. accounting standards ("U.S. GAAP"), as defined in that section to the extent that the use of those principles in the preparation of the consolidated financial statements does not contravene any provision of Part 6 of the Companies Act 2014.

Statement of directors' responsibilities in respect of the directors' report and the accompanying financial statements

The directors are responsible for preparing the directors' report and the consolidated and parent company financial statements in accordance with Irish law.

Irish law requires the directors to prepare financial statements for each financial year giving a true and fair view of the consolidated group and parent company's assets, liabilities and financial position as at the end of the financial year and of the profit or loss of the consolidated group for the financial year. Under that law, the Directors have prepared the consolidated financial statements in accordance with U.S. accounting standards, as defined in Section 279(1) of the Companies Act 2014, to the extent that the use of those principles in the preparation of the consolidated financial statements does not contravene any provision of the Companies Act 2014 or of any regulations made thereunder, and the parent company financial statements in accordance with

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RVL Pharmaceuticals plc

DIRECTORS' REPORT - continued

Statement of directors' responsibilities in respect of the directors' report and the accompanying financial statements - continued

Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council of the UK, including Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and Irish law).

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

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the consolidated financial statements comply with accounting principles generally accepted in the United States of America (U.S. GAAP) to the extent that it does not contravene Irish Company Law and that the parent company financial statements of the Company comply with accounting standards issued by the Financial Reporting Council and Irish law;
• assess the consolidated group and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and enable them to ensure that the financial statements comply with the Companies Act 2014. They are responsible for such internal controls as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The directors are also responsible for preparing a directors' report that complies with the requirements of the Companies Act 2014.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website (www.rvlpharma.com). Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Accounting records

The directors believe that they have complied with the requirements of sections 281 to 285 of the Companies Act 2014 with regard to keeping adequate accounting records by employing accounting personnel with appropriate expertise and by providing adequate resources to the financial function. The accounting records of the Company are maintained at 400 Crossing Boulevard, Bridgewater, New Jersey 08807, USA, and are available at 3 Dublin Landings, North Wall Quay, Dublin 1, Ireland.

Directors' compliance statement

The directors, in accordance with Section 225(2) of the Companies Act 2014, acknowledge that they are responsible for securing the Company's compliance with certain obligations specified in that section arising from the Companies Act 2014, and Tax laws (collectively, the "relevant obligations"). The directors confirm that:

• a compliance policy statement has been drawn up setting out the Company's policies with regard to such compliance;
• appropriate arrangements and structures that, in their opinion, are designed to secure material compliance with the Company's relevant obligations, have been put in place; and
• a review has been conducted, during the financial year, of the arrangements and structures that have been put in place to secure the Company's compliance with its relevant obligations.

In discharging their responsibilities under Section 225 of the Companies Act 2014, the directors relied on the advice of persons who the directors believe have the requisite knowledge and experience to advise the Company on compliance with its relevant obligations.

Audit committee

In accordance with Section 167 of the Companies Act 2014, the Company has an audit committee, which meets the requirements of the Companies Act 2014.

Dividends

No dividends were paid or proposed during the financial year ended December 31, 2022.

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RVL Pharmaceuticals plc

DIRECTORS' REPORT - continued

Events since the end of the financial year

The Company evaluated all events or transactions that occurred subsequent to December 31, 2022 through the date of the approval of the directors' report and have identified the following events:

• In February 2023, the Company received $5.0 million in cash from Alora related to a contingent milestone payment earned in connection with the sale of the Legacy Business. In March 2023, the Company paid the $5.0 million to its lenders in satisfaction of mandatory repayment conditions required under its Note Purchase Agreement, as amended, thereby reducing the outstanding principal balance of the second tranche Senior Secured Notes by $4.3 million.
• On March 8, 2023, the Company entered into a second amendment to the Note Purchase Agreement
  (the "Second Amendment") with, among others, the Purchasers and the Administrative Agent, which further amended the Amended Note Purchase Agreement. The Second Amendment provided solely for the immediate reduction of the minimum liquidity requirement from $15.0 million to $12.5 million.
• Between January and March 2023, the Company received an aggregate of $4.1 million in federal tax refunds related to income taxes paid in prior periods. The Company is continuing to pursue the collection of $1.8 million of additional federal refund claims.
• In March 2023, the Company amended a lease agreement for its Sayreville, New Jersey, USA location, the operations site of RVL Pharmacy, to extend the lease for an additional 36 months through December 31, 2026.

Going concern

At December 31, 2022, the Company had cash and cash equivalents of $44.5 million, an accumulated deficit of $569.2 million, and senior secured indebtedness with aggregate principal maturities of $75.0 million, with such maturities commencing in March 2024 and extending through October 2026. In addition, the Company's senior secured indebtedness contains various restrictive covenants including minimum liquidity and minimum quarterly product sales requirements. For the years ended December 31, 2022 and 2021, the Company incurred losses from continuing operations of $51.7 million and $82.8 million, respectively, and used $37.8 million and $54.7 million, respectively, in cash from operating activities.

The divestiture of the Legacy Business in 2021 resulted in the loss of substantially all the Company's revenue generating assets. The Company's current business plan is focused on the continued commercialisation and growth of Upneeq, which has and will continue to diminish the Company's cash flows in at least the near term. The Company will require additional capital to fund its operating needs, including the expanded commercialisation of Upneeq and other activities. The Company expects to incur significant expenditures and sustain operating losses in the future.

The directors do not believe that current sources of liquidity will be sufficient to fund the Company's planned expenditures and meet its obligations, including the minimum liquidity covenant, for a period of 12 months following the date the accompanying consolidated financial statements are issued without raising additional funding of at least $15.0 million. However, if the Company's future profitability from net product sales are lower than the projections used in its going concern assessment, this will consequently increase its minimum additional funding needs. As a result, there is a material uncertainty that may cast significant doubt over the Company's ability to operate as a going concern. If the Company is not successful in executing its strategic plans described below, the directors expect that the Company's current cash on hand, together with the net proceeds of anticipated sales of Upneeq, may not be sufficient to meet the minimum liquidity covenant through the end of the third quarter of 2023. The Company's ability to continue as a going concern will require it to obtain additional funding, generate positive cash flow from operations by, among other things, reducing expenses and/or realizing operational efficiencies, and/or enter into strategic alliances or sell assets.

The directors' plans to address these conditions by way of securing additional funding include pursuing one or more of the following options, none of which can be guaranteed or is entirely within the Company's control, (i) raise funds through additional sales of ordinary shares, through equity sales agreements with brokers/dealers or other public or private equity financings, (ii) raise funds through borrowings under new and/or existing debt facilities and/or convertible debt, and/or (iii) raise non-dilutive funds through product collaborations, including co-promotions, and/or to partner or sell a portion or all rights to any of the Company's assets.

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