Note 1. Organization and Nature of Operations

Osmotica Pharmaceuticals plc (formerly known as Lilydale Limited and Osmotica Pharmaceuticals Limited) is an Irish public limited company. Osmotica Holdings S.C.Sp. acquired Osmotica Pharmaceuticals plc on April 30, 2018 for the purpose of facilitating an offering of ordinary shares in an initial public offering. On October 22, 2018, Osmotica Pharmaceuticals plc completed its initial public offering (the “IPO”), in which it issued and allotted 7,647,500 ordinary shares at a public offering price of $7.00 per share. The number of shares issued in the IPO reflected the exercise in full of the underwriters’ option to purchase 997,500 additional ordinary shares. In addition, the Company issued and allotted 2,014,285 ordinary shares at the public offering price in a private placement to investment funds affiliated with Avista Capital Partners, Altchem Limited and an entity controlled by the Company’s Chief Financial Officer. The aggregate net proceeds from the IPO and the private placement were approximately $58.1 million after deducting underwriting discounts and commissions and estimated offering expenses.

Immediately prior to the IPO and prior to the commencement of trading of Osmotica Pharmaceuticals plc’s ordinary shares on the Nasdaq Global Select Market, Osmotica Holdings S.C.Sp. undertook a series of restructuring transactions that resulted in Osmotica Pharmaceuticals plc becoming the direct parent of Osmotica Holdings S.C.Sp with each holder of common units of Osmotica Holdings S.C.Sp. receiving approximately 42.84 ordinary shares of Osmotica Pharmaceuticals plc in exchange for each such common unit. In addition, each holder of an option to purchase common units of Osmotica Holdings S.C.Sp. received an option to purchase the number of ordinary shares of Osmotica Pharmaceuticals plc determined by multiplying the number of units underlying such option by approximately 42.84 (rounded down to the nearest whole share) and dividing the exercise price per unit for such option by approximately 42.84 (rounded up to the nearest whole cent). These transactions are referred to as the “Reorganization”. Accordingly, all share and share amounts for all periods presented in the accompanying financial statements have been adjusted retroactively, where applicable, to reflect the stock split.

Until the Reorganization on October 17, 2018, Osmotica Pharmaceuticals plc did not conduct any operations (other than activities incidental to its formation, the Reorganization and the pursuit of an initial public offering). Upon the completion of the Reorganization, the historical consolidated financial statements of Osmotica Holdings S.C.Sp. became the historical financial statements of Osmotica Pharmaceuticals plc. Accordingly, the accompanying consolidated financial statements included herein reflect the financial information of Osmotica Holdings S.C.Sp.

Osmotica Holdings S.C.Sp.is a Luxembourg special limited partnership, formed on January 28, 2016. Osmotica Holdings US LLC, a subsidiary of Osmotica Holdings S.C.Sp. entered into a fifty-fifty partnership (the “Merger”), effective February 3, 2016, pursuant to a definitive agreement between Vertical/Trigen Holdings, LLC (“Vertical/Trigen”) and members, and Osmotica Holdings Corp Limited and Subsidiaries. Osmotica Holdings S.C.Sp. and several other holding companies and partnerships were formed as a result of the Merger. Pursuant to the Merger, Vertical/Trigen was deemed to be the accounting acquirer. Osmotica is a fully integrated biopharmaceutical company focused on the development and commercialization of specialty products that target markets with underserved patient populations.

Unless otherwise indicated or required by the context, references throughout to “Osmotica,” or the “Company,” refer to (i) prior to the completion of the Reorganization, Osmotica Holdings S.C.Sp. and its consolidated subsidiaries, including, from and after April 30, 2018, Osmotica Pharmaceuticals plc, and (ii) following the completion of the Reorganization, Osmotica Pharmaceuticals plc and its consolidated subsidiaries, including Osmotica Holdings S.C.Sp.

Immaterial Correction of Errors

Subsequent to the issuance of the unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2018 and 2017 in the Company’s Quarterly Report on Form 10-Q, the Company determined that a revision was required to correct misstatements associated with the business combination between Osmotica Holdings Limited and subsidiaries and Vertical/Trigen Holdings LLC which occurred on February 3, 2016. For the year ended December 31, 2017, the correction resulted in an increase in Goodwill of $34,357,100; a decrease in Prepaid Expenses of $316,197; an increase in Deferred Tax Liability of $17,527,389; an increase in Partners’ Capital of $16,513,514; and an increase in Income Tax Benefit and corresponding decrease in Net Loss of $4,013,161. The Company has corrected these amounts in the periods presented in these consolidated financial statements with an adjustment to the Company’s consolidated financial statements for the year ended December 31, 2016 and the adjustments were determined to be immaterial to the Company’s financial position as previously reported.

For the statement of changes in partners’ capital/shareholders equity, the correction resulted in an increase of $12,500,353 in the balance of Partners’ Capital at December 31, 2016.

For the consolidated statement of cash flows for the year ended December 31, 2017, within the Cash Flows from Operating Activities section, Net loss decreased by $4,013,161, deferred income tax benefit increased by $4,013,161.

The impacts of the corrections have been reflected throughout the consolidated financial statements, including the applicable notes, as appropriate.

The following table presents the amounts originally reported, net correction adjustments, and corrected amounts for items affected by the corrections for the three months and nine months ended on September 30, 2018 and 2017, and year-to-date periods ended December 31, 2017:


	Year ended December 31, 2017
	As originally		Net		As
	reported		adjustments		corrected
Partners' capital as of 12/31/2016	$	465,205,153	$	12,500,353	$	477,705,506
Goodwill		152,815,716		34,357,100		187,172,816
Prepaid expenses		25,814,289		(316,197)		25,498,092
Total assets		885,699,246		34,040,903		919,740,149
Deferred taxes		25,364,055		17,527,389		42,891,444
Total liabilities		466,428,992		17,527,389		483,956,381
Partners' capital as of 12/31/2017		419,270,254		16,513,514		435,783,768
Total liabilities and partners' capital		885,699,246		34,040,903		919,740,149
Income tax benefit		40,487,570		4,013,161		44,500,731
Net loss		(45,154,972)		4,013,161		(41,141,811)
Comprehensive loss		(46,062,899)		4,013,161		(42,049,738)
Loss per share		(1.05)		0.09		(0.96)


	Nine months ended September 30, 2018
	As originally		Net		As
	reported		adjustments		corrected
Goodwill	$	152,815,716	$	34,357,100	$	187,172,816
Prepaid expense and other current assets		18,802,004		5,628,370		24,430,374
Total assets		855,472,388		39,985,470		895,457,858
Deferred taxes		13,124,607		22,048,491		35,173,098
Total liabilites		439,969,303		22,048,491		462,017,794
Partners' capital as of 9/30/2018		417,374,758		17,936,979		435,311,737
Total liabilities and partners' capital		855,472,388		39,985,470		895,457,858
Income tax benefit		1,999,323		1,423,465		3,422,788
Net loss		(3,574,093)		1,423,465		(2,150,628)
Comprehensive loss		(4,812,620)		1,423,465		(3,389,155)
Loss per share		(0.08)		0.03		(0.05)


	Nine months ended September 30, 2017
	As originally		Net		As
	reported		adjustments		corrected
Income tax benefit	$	16,785,658	$	(644,853)	$	16,140,805
Net loss		(42,332,512)		(644,853)		(42,977,365)
Comprehensive loss		(41,915,544)		(644,853)		(42,560,397)
Loss per share		(0.99)		(0.02)		(1.01)


	Three months ended September 30, 2017
	As originally		Net		As
	reported		adjustments		corrected
Income tax benefit	$	12,046,928	$	(1,704,498)	$	10,342,430
Net loss		(12,272,821)		(1,704,498)		(13,977,319)
Comprehensive loss		(11,979,971)		(1,704,498)		(13,684,469)
Loss per share		(0.29)		(0.04)		(0.33)


	Three months ended September 30, 2018
	As originally		Net		As
	reported		adjustments		corrected
Income tax benefit	$	2,489,029	$	1,557,842	$	4,046,871
Net loss		(4,988,310)		1,557,842		(3,430,468)
Comprehensive loss		(5,136,493)		1,557,842		(3,578,651)
Loss per share		(0.12)		0.04		(0.08)