What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-13 compared with 2021-05-14 · 94 added, 71 removed, 359 unchanged (31% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

25 unchanged sentences

100,000,000 shares authorized;

15,084,464 and 14,988,429 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

14,926,059 and 14,988,429 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

48,688,384 49,121,523

8 unchanged sentences

Condensed Consolidated Statements of Operations

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Net revenues $ 9,055,483 $ 9,598,177 $ 19,592,642 $ 17,928,911

8 unchanged sentences

Interest income 6,591 28,661 12,017 58,549

Other income 2,187,140 — 2,187,140 —

Interest expense ( 25,859 ) ( 119,455 ) ( 50,276 ) ( 152,520 )

20 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Noncash interest expense 27,666 22,973

Gain on forgiveness of debt ( 2,187,140 ) —

Net changes in assets and liabilities affecting operating activities:

26 unchanged sentences

Condensed Consolidated Statements of Equity

Common stock Retained earnings Noncontrolling interests Total equity

Common stock Retained earnings (deficit) Noncontrolling interests Total equity

Shares Amount

4 unchanged sentences

Balance, March 31, 2020 15,318,539 $ 49,737,428 $ 152,775 $ ( 47,145 ) $ 49,843,058

Share-based compensation 4,200 278,349 — — 278,349

Repurchase of common shares ( 141,463 ) ( 769,648 ) — — ( 769,648 )

Net loss — — ( 918,275 ) ( 22,314 ) ( 940,589 )

Balance, June 30, 2020 15,181,276 $ 49,246,129 $ ( 765,500 ) $ ( 69,459 ) $ 48,411,170

Common stock Retained earnings (deficit) Noncontrolling interests Total equity

5 unchanged sentences

Balance, March 31, 2021 15,084,464 $ 48,981,395 $ ( 1,964,185 ) $ ( 139,283 ) $ 46,877,927

Share-based compensation 191,954 191,954

Repurchase of common shares ( 158,405 ) ( 484,965 ) ( 484,965 )

Net income (loss) 1,228,560 ( 5,069 ) 1,223,491

Balance, June 30, 2021 14,926,059 $ 48,688,384 $ ( 735,625 ) $ ( 144,352 ) $ 47,808,407

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

16 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”).

The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

The results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

Discontinued Operations

15 unchanged sentences

Our business and our clinical studies were impacted as less patients sought elective surgeries and our access to medical facilities was substantially limited.

During 2020, we carefully monitored our supply chain during the pandemic including the flow of raw materials into the plants that manufacture our products as well as the batches of finished product emerging from those facilities.

During 2020 and 2021, we carefully monitored our supply chain during the pandemic including the flow of raw materials into the plants that manufacture our products as well as the batches of finished product emerging from those facilities.

Several of our brands were negatively impacted by the lockdowns and postponement of physician office visits and elective procedures.

15 unchanged sentences

2016-13 discussed above, in May 2019, the FASB issued ASU 2019-05, "Financial Instruments-Credit Losses (Topic 326):

Targeted Transition Relief" which provides transition relief for ASU 2016-13 by providing entities with an alternative to irrevocably electing the fair value option for eligible financial assets measured at amortized cost upon adoption of the new credit losses standard.

Targeted Transition Relief" which provides transition relief for ASU 2016-13 by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the new credit losses standard.

Certain eligibility requirements must be met and the election must be applied on an instrument-by-instrument basis.

16 unchanged sentences

(2) EARNINGS (LOSS) PER SHARE

The following table reconciles the numerator and denominator used to calculate diluted earnings (loss) per share for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

The following table reconciles the numerator and denominator used to calculate diluted earnings (loss) per share for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Net income (loss) from continuing operations $ 724,684 $ ( 1,679,211 )

6 unchanged sentences

Weighted-average shares outstanding – diluted 15,109,246 15,241,463

As of March 31, 2021 and 2020, restricted stock awards and options to purchase 215,600 and 431,226 shares of common stock, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive.

Six months ended June 30,

Net income (loss) from continuing operations $ 373,935 $ ( 3,562,629 )

Discontinued operations 994,217 1,556,895

Net income (loss) 1,368,152 ( 2,005,734 )

Net income (loss) at subsidiary attributable to noncontrolling interest 27,236 31,839

Net income (loss) attributable to common shareholders $ 1,395,388 $ ( 1,973,895 )

Weighted-average shares outstanding – basic 14,970,241 15,241,020

Dilutive effect of other securities 201,348 —

Weighted-average shares outstanding – diluted 15,171,589 15,241,020

As of June 30, 2021 and 2020, restricted stock awards and options to purchase 198,300 and 13,500 shares of common stock, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive.

Product Revenues

The Company accounts for revenues from contracts with customers under ASC 606, which became effective January 1, 2018.

The Company’s net revenues consisted of the following for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

The Company’s net revenues consisted of the following for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Kristalose $ 5,275,065 $ 3,477,471 $ 8,269,443 $ 6,771,433

1 unchanged sentence

Caldolor 938,328 1,166,569 2,477,824 2,261,286

Vaprisol 399,952 174,159 1,534,216 382,016

Acetadote 152,781 595,310 269,972 1,308,711

Omeclamox-Pak ( 24,109 ) 10,948 ( 474,371 ) 124,371

Vaprisol 1,134,264 208,763

RediTrex 7,382 — ( 24,870 ) —

1 unchanged sentence

Total net revenues $ 9,055,483 $ 9,598,177 $ 19,592,642 $ 17,928,911

The Omeclamox-Pak revenue for the first quarter of 2021 was the result of Cumberland currently being out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties due to the impact of COVID-19, and their operations are currently suspended.

The Company is awaiting resumption of their operations.

Net revenue for the first quarter of 2021 was also negatively impacted by product returns during the period.

The Omeclamox-Pak revenue for the first and second quarter of 2021 was the result of Cumberland currently being out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties due to the impact of COVID-19.

They are under new management and are in the process of a reorganization.

Discussions with the packager are ongoing.

Net revenue was also negatively impacted by product returns during the periods.

Other Revenues

The Company has agreements with international partners for commercialization of the Company's products with associated payments included in other revenues.

Those agreements provide that each of the partners are responsible for seeking regulatory approvals for the product, and following approval, each partner will be responsible for the ongoing distribution and sales in the

respective international territories.

The Company provides a dossier for product registration and maintains responsibility for the relevant intellectual property.

5 unchanged sentences

The Life Sciences Center is a research center that provides scientists with access to flexible lab space and other resources to develop biomedical products.

Grant revenue from these programs totaled approximately $ 0.1 million and $ 0.2 million for the three months ended March 31, 2021 and 2020 , respectively.

Grant revenue from these programs totaled approximately $ 0.2 million and $ 0.5 million for the three months ended June 30, 2021 and 2020 , respectively.

(4) INVENTORIES

5 unchanged sentences

When evidence indicates that the carrying value may not be recoverable, a charge is taken to reduce the inventory to its current net realizable value.

At March 31, 2021 and December 31, 2020, the Company had recognized and maintained cumulative net realizable value charges for potential obsolescence and discontinuance losses of approximately $ 0.1 million and $ 0.2 million, respectively.

In connection with the acquisition of certain product rights related to the Kristalose brand, the Company is responsible for the purchase of the active pharmaceutical ingredient (“API”) for Kristalose and maintains the inventory at third-party packagers.

At June 30, 2021 and December 31, 2020, the

Company had recognized and maintained cumulative net realizable value charges for potential obsolescence and discontinuance losses of approximately $ 0.3 million and $ 0.2 million, respectively.

The Company is responsible for the purchase of the active pharmaceutical ingredient (“API”) for Kristalose and maintains the inventory at third-party packagers.

As that API is consumed in production, the value of the API is transferred from raw materials to finished goods.

API for the Company's Vaprisol brand is also included in the raw materials inventory at March 31, 2021 and December 31, 2020.

API for the Company's Vaprisol brand is also included in the raw materials inventory at June 30, 2021 and December 31, 2020.

Consigned inventory represents Authorized Generic inventory stored with Perrigo until shipment.

As part of the Vibativ acquisition, Cumberland acquired API and work in process inventories of $ 15.6 million that were all initially classified as non-current inventories at the date of acquisition.

At March 31, 2021 and December 31, 2020, total non-current inventory, including Vibativ and ifetroban, was $ 10.4 million and $ 11.7 million, respectively.

The Company had $ 0.8 million and $ 2.1 million of Vibativ finished goods included in non-current inventory at March 31, 2021 and December 31, 2020.

The Company also has obtained $ 0.4 million of finished goods in non-current inventory for API related to its ifetroban clinical initiatives at March 31, 2021 and December 31, 2020.

At March 31, 2021 and December 31, 2020 t he Company's net inventories consisted of the following:

March 31, 2021 December 31, 2020

At June 30, 2021 and December 31, 2020, total non-current inventory, including Vibativ and ifetroban, was $ 9.9 million and $ 11.7 million, respectively.

The Company had $ 0.3 million and $ 2.1 million of Vibativ finished goods included in non-current inventory at June 30, 2021 and December 31, 2020, respectively.

The Company also has obtained $ 0.4 million of finished goods in non-current inventory for API related to its ifetroban clinical initiatives at June 30, 2021 and December 31, 2020.

At June 30, 2021 and December 31, 2020 the Company's net inventories consisted of the following:

June 30, 2021 December 31, 2020

Raw materials and work in process $ 14,156,248 $ 16,223,162

6 unchanged sentences

This lease currently expires in October 2022.

The operating leases also include the lease of approximately 14,200 square feet of wet laboratory and office space in Nashville, Tennessee by CET, our majority-owned subsidiary, where it operates the CET Life Sciences Center.

The Company's operating leases also include the lease of approximately 14,200 square feet of wet laboratory and office space in Nashville, Tennessee by CET, our majority-owned subsidiary, where it operates the CET Life Sciences Center.

This lease currently expires in April 2023.

4 unchanged sentences

The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments is 7.42 %.

The weighted-average remaining lease term at March 31, 2021 is 1.7 years.

The weighted-average remaining lease term at June 30, 2021 is 1.5 years.

Lease Position

At March 31, 2021 and December 31, 2020 , the Company's lease assets and liabilities were as follows:

Right-of-Use Assets March 31, 2021 December 31, 2020

At June 30, 2021 and December 31, 2020 , the Company's lease assets and liabilities were as follows:

Right-of-Use Assets June 30, 2021 December 31, 2020

Operating lease right-of-use assets $ 1,535,556 $ 2,028,148

Lease Liabilities March 31, 2021 December 31, 2020

Lease Liabilities June 30, 2021 December 31, 2020

Operating lease current liabilities $ 1,067,880 $ 1,016,779

3 unchanged sentences

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows:

Maturity of Lease Liabilities at March 31, 2021

Maturity of Lease Liabilities at June 30, 2021

Operating Leases

6 unchanged sentences

Rent expense and sublease income were as follows:

Three months ended March 31,

Six months ended June 30,

Rent expense $ 605,130 $ 571,399

4 unchanged sentences

In January 2019, the Company's Board of Directors established the current $ 10 million repurchase program to replace the prior authorizations.

During the three months ended March 31, 2021 and March 31, 2020, the Company repurchased 91,724 shares and 164,866 shares, respectively, of common stock for approximately $ 0.3 million and $ 0.4 million, respectively.

During the six months ended June 30, 2021 and June 30, 2020, the Company repurchased 250,129 shares and 306,329 shares, respectively, of common stock for approximately $ 0.8 million and $ 1.2 million, respectively.

At June 30, 2021, approximately $5.4 million of common shares was left to repurchase under this program.

Share purchases and sales

3 unchanged sentences

The Shelf Registration was declared effective in January 2018.

It also included an At the Market ("ATM") feature that allows the Company to sell common shares at market prices, along with an agreement with B.

It also included an At the Market ("ATM") feature that allowed the Company to sell common shares at market prices, along with an agreement with B.

Riley FBR Inc.

5 unchanged sentences

that would allow the Company to issue shares of its common stock.

The Company did not issue any shares under an ATM during the three months ended March 31, 2021 or March 31, 2020.

The Company did not issue any shares under an ATM during the six months ended June 30, 2021 or June 30, 2020.

Restricted Share Grants and Incentive Stock Options

During the three months ended March 31, 2021 and March 31, 2020, the Company issued 35,850 shares and 229,141 shares of restricted stock to employees and directors, respectively.

During the six months ended June 30, 2021 and June 30, 2020, the Company issued 36,850 shares and 229,141 shares of restricted stock to employees and directors, respectively.

Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the date of grant and for directors on the one-year anniversary of the date of grant.

During the three months ended March 31, 2021, the Company also issued 172,350 incentive stock options to employees that cliff-vest on the fourth anniversary of the date of grant, that are set to expire in March 2031.

During the six months ended June 30, 2021, the Company also issued 173,350 incentive stock options to employees that cliff-vest on the fourth anniversary of the date of grant, that are set to expire in March and May 2031.

Stock compensation expense is presented as a component of general and administrative expense in the condensed consolidated statements of operations.

9 unchanged sentences

On August 14, 2018, the Company amended the Pinnacle Agreement ("First Amendment") to replace the single financial covenant with the maintenance of either the Funded Debt Ratio or a Tangible Capital Ratio, as defined in the First Amendment.

The Company was in compliance with the Tangible Capital Ratio financial covenant as of March 31, 2021.

As of March 31, 2021 and December 31, 2020, the Company had $ 15.0 million in borrowings outstanding under its revolving credit facility.

The Company was in compliance with the Tangible Capital Ratio financial covenant as of June 30, 2021.

As of June 30, 2021 and December 31, 2020, the Company had $ 14.0 million and $ 15.0 million in borrowings outstanding under its revolving credit facility.

The interest rate on the Pinnacle Agreement is based on LIBOR plus an interest rate spread.

The pricing under the Fourth Amendment provides for an interest rate spread of 1.75 % to 2.75 % above LIBOR with a minimum LIBOR of 0.90 %.

applicable interest rate under the Pinnacle Agreement was 3.65 % at March 31, 2021.

The applicable interest rate under the Pinnacle Agreement was 3.65 % at June 30, 2021.

In addition, a fee of 0.25 % per year is charged on the unused line of credit.

Interest and the unused line fee are payable quarterly.

Borrowings under the line of credit are collateralized by substantially all of our assets.

Borrowings under the line of credit are collateralized by substantially all of the Company's assets.

Paycheck Protection Program Loan

2 unchanged sentences

Small Business Administration ("SBA").

The loan matures April 14, 2022, and bears interest at a rate of 1.0% per year, payable monthly.

The loan may be prepaid at any time prior to maturity with no prepayment penalties.

Funds from the loan are to be used to maintain payroll, continue group health care benefits and pay for rent and utilities.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered utilities.

From the date of funding the Company used the loan amount for such qualifying expenses.

Cumberland has elected to account for the proceeds of the loan as a government grant under International Accounting Standard 20 ("IAS 20"), Accounting for Government Grants and Disclosure of Government Assistance.

Pursuant to the PPP requirements, loan funds were used to maintain payroll, continue group health care benefits, and pay for rent and utilities during the pandemic.

We applied for this loan after carefully considering, with our bank, the eligibility criteria to participate in this program, and determining that Cumberland met those criteria.

We evaluated and provided information on our payroll and other qualifying expenses to determine the amount of PPP funds to apply for.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

Cumberland used the PPP loan funds for such qualifying expenses.

Due to assistance from our PPP loan, the Company did not lay off or furlough any employees as a result of the COVID-19 pandemic.

Cumberland elected to account for the proceeds of the loan as a government grant under International Accounting Standard 20 ("IAS 20"), Accounting for Government Grants and Disclosure of Government Assistance.

The permitted analogous use of IAS 20 outlines a model for the accounting for government assistance, including forgivable loans.

As a result, the Company has recorded the $ 2,187,140 as a deferred income liability, which is included as a component of other current liabilities on the condensed consolidated balance sheet.

The Company intends to apply IAS 20 to the PPP loan forgiveness and has presented the amounts expected to be forgiven as deferred income.

The Company will account for the anticipated forgiveness of the PPP loan under IAS 20 when the Company believes that the forgiveness is reasonably assured.

Cumberland applied for this loan after carefully considering, with its bank, the eligibility criteria to participate in this program, and determining that Cumberland met these criteria.

The Company evaluated and provided information on our payroll and other qualifying expenses to determine the amount of PPP funds to apply for.

Cumberland has not laid off or furloughed any employees as a result of the COVID-19 pandemic and, based on assistance from the PPP loan, the Company currently does not foresee doing so.

In October 2020, the Company submitted a request for forgiveness of the PPP loan.

The request was approved by the lender, Pinnacle Bank, who then submitted it to SBA for the SBA's review and approval.

As a result, the Company recorded the $ 2,187,140 as a deferred income liability, which was included as a component of other current liabilities on the condensed consolidated balance sheet at December 31, 2020.

In October 2020, Cumberland submitted a request for the loan’s forgiveness.

On June 11, 2021, the Company received a formal notice from the SBA that the full amount of the loan was forgiven.

The Company accounted for the forgiveness of the PPP loan under IAS 20 and recorded the $ 2,187,140 as other income.

Joint Venture Agreement

1 unchanged sentence

The joint venture, as a limited liability company, will focus on acquiring, developing, registering, and commercializing development stage and commercial stage biopharmaceuticals for China, Hong Kong and other Asian markets.

The agreement provides for initial investment from WinHealth in the form of a $ 0.2 million equity contribution and an initial investment from Cumberland in the form of a $ 0.2 million convertible note, which was funded during the three months ended March 31, 2021.

The joint venture will seek additional future capital from additional investors and has entered into exclusive option agreements to license intellectual property from both Cumberland Pharmaceuticals Inc.

1 unchanged sentence

(7) INCOME TAXES

As of March 31, 2021, the Company has approximately $ 56.3 million in federal net operating loss carryforwards including approximately $ 44.1 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options.

As of June 30, 2021, the Company has approximately $ 56.5 million in federal net operating loss carryforwards including approximately $ 44.1 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options.

These have historically been used to significantly offset income tax obligations.

5 unchanged sentences

The Company has determined that these collaborative agreements, with the exception of the collaborative payment received related to RediTrex, do not meet the criteria for accounting under ASC Topic 808, Collaborative Agreements .

The agreements do not specifically designate each party’s rights and obligations to each

other under the collaborative arrangements.

The agreements do not specifically designate each party’s rights and obligations to each other under the collaborative arrangements.

Except for patent defense costs, expenses incurred by one party are not required to be reimbursed by the other party.

6 unchanged sentences

The Company made an upfront payment of $ 20.0 million at the closing of the transaction and a $ 5.0 million milestone payment in early April 2019.

In addition, Cumberland has agreed to pay a royalty of up to 20 % on future net sales of the product.

In addition, Cumberland has agreed to pay a royalty of up to 20 % of on-going net sales of the product.

The future royalty payments were required to be recognized at their acquisition-date fair value as a contingent consideration liability, as part of the contingent consideration transferred in the business combination.

7 unchanged sentences

Contingent consideration earned and accrued in operating expenses 760,225

Balance at March 31, 2021

The contingent consideration liability of $ 7.3 million was classified as other current liabilities of $ 2.7 million and other long-term liabilities of $ 4.6 million on the condensed consolidated balance sheet as of March 31, 2021.

Balance at June 30, 2021

The contingent consideration liability of $ 7.4 million was classified as other current liabilities of $ 2.9 million and other long-term liabilities of $ 4.5 million on the condensed consolidated balance sheet as of June 30, 2021.

In November 2016, the Company announced an agreement with the Nordic Group B.V.

9 unchanged sentences

The FDA approval also resulted in a $ 1.0 million milestone payment due to Nordic.

During December 2020, Cumberland launched RediTrex and the launch also resulted in a $ 1.0 million milestone payment due to Nordic.

This milestone payment will be paid during 2021 and was recorded as an other current liability at December 31, 2020.

Cumberland has approximately $ 2.8 million in net intangible assets related to RediTrex at March 31, 2021.

During December 2020, Cumberland introduced RediTrex and the launch that will take place in late 2021 will result in a $ 1.0 million milestone payment due to Nordic.

This milestone payment will be paid during 2022 and is being reported as a current liability at June 30, 2021.

Cumberland has approximately $ 2.7 million in net intangible assets related to RediTrex at June 30, 2021.

Ethyol and Totect

6 unchanged sentences

In exchange for the return of these product license rights and the non-compete provisions of the Dissolution Agreement, Cumberland is receiving $ 5 million in financial consideration paid in quarterly installments over the two-years following the transition date.

Cumberland recorded the first four quarterly installments totaling $ 3.0 million during 2020 and the fifth installment of $ 0.5 million during the three months ended March 31, 2021 as discontinued operations.

The Company will record the remaining quarterly installments during the balance of 2021.

Cumberland recorded the first four quarterly installments totaling $ 3.0 million during 2020 and the next two installments totaling $ 1.0 million during the six months ended June 30, 2021, as discontinued operations.

The Company will record the remaining two quarterly installments during the balance of 2021.

The exit from Ethyol and Totect meets the accounting criteria to be reported as discontinued operations.

4 unchanged sentences

The Company does not incur expenses associated with these payments from Clinigen.

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Revenues $ 498,807 $ 738,622 $ 994,217 $ 1,556,895

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements