What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-13 · 64 added, 55 removed, 398 unchanged (23% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets:

25 unchanged sentences

100,000,000 shares authorized;

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

14,850,526 and 14,988,429 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

48,612,935 49,121,523

8 unchanged sentences

Condensed Consolidated Statements of Operations

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

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

32 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

2 unchanged sentences

Net income (loss) from continuing operations ( 1,209,545 ) ( 4,838,249 )

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:

Depreciation and amortization expense 3,529,245 3,524,684

10 unchanged sentences

Other long-term liabilities ( 943,439 ) ( 1,585,584 )

Net cash provided by (used in) operating activities from continuing operations 3,490,553 2,332,634

Net cash provided by operating activities from continuing operations 2,891,759 2,395,054

Discontinued operations 1,491,004 2,166,086

2 unchanged sentences

Additions to property and equipment ( 94,485 ) ( 95,189 )

Proceeds from surrender of life insurance policies — 460,888

Note receivable investment funding ( 200,000 ) —

27 unchanged sentences

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

Share-based compensation 4,450 262,415 — — 262,415

Repurchase of common shares ( 101,354 ) ( 332,504 ) — — ( 332,504 )

Net loss — — ( 481,737 ) ( 15,967 ) ( 497,704 )

Balance, September 30, 2020 15,084,372 15,084,372 $ 49,176,040 $ ( 1,247,237 ) $ ( 85,426 ) $ 47,843,377

Common stock Retained earnings (deficit) Noncontrolling interests Total equity

10 unchanged sentences

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

Share-based compensation 875 162,167 — — 162,167

Repurchase of common shares ( 76,408 ) ( 237,616 ) — — ( 237,616 )

Net loss — — ( 1,055,278 ) ( 31,415 ) ( 1,086,693 )

Balance, September 30, 2021 14,850,526 $ 48,612,935 $ ( 1,790,903 ) $ ( 175,767 ) $ 46,646,265

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 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.

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

Discontinued Operations

52 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 and six months ended June 30, 2021 and 2020:

Three months ended June 30,

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

Three months ended September 30,

Net income (loss) from continuing operations $ ( 1,583,480 ) $ ( 1,275,620 )

6 unchanged sentences

Weighted-average shares outstanding – diluted 14,880,887 15,134,583

Six months ended June 30,

Nine months ended September 30,

Net income (loss) from continuing operations $ ( 1,209,545 ) $ ( 4,838,249 )

6 unchanged sentences

Weighted-average shares outstanding – diluted 15,139,904 15,206,179

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.

As of September 30, 2021 and 2020, restricted stock awards and options to purchase 158,900 and 197,210 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 and six months ended June 30, 2021 and 2020:

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

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

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

8 unchanged sentences

Total net revenues $ 8,072,540 $ 9,250,689 $ 27,665,182 $ 27,179,600

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 Omeclamox-Pak revenue for the first, second and third 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.

1 unchanged sentence

Discussions with the packager are ongoing.

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

In the third quarter of 2021, the amounts noted were normal adjustments by channel partners.

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

Other Revenues

8 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 $ 0.2 million and $ 0.5 million for the three months ended June 30, 2021 and 2020 , respectively.

Grant revenue from these programs totaled approximately $ 0.02 million and $ 0.1 million for the three months ended September 30, 2021 and 2020 , and $ 0.3 million and $ 0.7 million for the nine months ended September 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 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.

At September 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 June 30, 2021 and December 31, 2020.

API for the Company's Vaprisol brand is also included in the raw materials inventory at September 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 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

At September 30, 2021 and December 31, 2020, total non-current inventory, including Vibativ and ifetroban, was $ 9.5 million and $ 11.7 million, respectively.

The Company had $ 0.2 million and $ 2.1 million of Vibativ finished goods included in non-current inventory at September 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 September 30, 2021 and December 31, 2020.

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

September 30, 2021 December 31, 2020

Raw materials and work in process $ 13,782,630 $ 16,223,162

13 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 June 30, 2021 is 1.5 years.

The weighted-average remaining lease term at September 30, 2021 is 1.2 years.

Lease Position

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

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

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

Operating lease right-of-use assets $ 1,282,275 $ 2,028,148

Lease Liabilities June 30, 2021 December 31, 2020

Lease Liabilities September 30, 2021 December 31, 2020

Operating lease current liabilities $ 1,094,187 $ 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 June 30, 2021

Maturity of Lease Liabilities at September 30, 2021

Operating Leases

6 unchanged sentences

Rent expense and sublease income were as follows:

Six months ended June 30,

Nine months ended September 30,

Rent expense $ 910,975 $ 871,441

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 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.

During the nine months ended September 30, 2021 and September 30, 2020, the Company repurchased 326,537 shares and 407,683 shares, respectively, of common stock for approximately $ 1.0 million and $ 1.5 million, respectively.

At September 30, 2021, approximately $ 5.2 million of common shares was left to repurchase under this program.

Share purchases and sales

11 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 six months ended June 30, 2021 or June 30, 2020.

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

Restricted Share Grants and Incentive Stock Options

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.

During the nine months ended September 30, 2021 and September 30, 2020, the Company issued 36,850 shares and 230,491 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 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.

During the nine months ended September 30, 2021, the Company also issued 174,800 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.

Debt Agreement

On October 7, 2020, the Company entered into a Third Amendment to the Revolving Credit Note and Fourth Amendment (“Fourth Amendment”) to the Revolving Credit Loan Agreement with Pinnacle Bank (the “Pinnacle Agreement”).

On October 28, 2021, the Company and Pinnacle Bank entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment ("Fifth Amendment") to the Revolving Credit Loan Agreement to renew the Revolving Credit Loan.

The original Pinnacle Agreement was dated July 2017.

The Fourth Amendment provides for a principal available for borrowing of up to $ 15 million and Cumberland has the ability to request an increase of up to an additional $ 5 million, upon the satisfaction of certain conditions and approval by Pinnacle Bank.

If fully expanded, the Fourth Amendment would provide a maximum principal available for borrowing of up to $ 20 million.

The Fourth Amendment extended the maturity date of the Pinnacle Agreement through October 1, 2022.

On May 10, 2019, the Company entered into a third amendment ("Third Amendment") to the Pinnacle Agreement, which extended the term of the Pinnacle Agreement through July 31, 2021 as well as modified certain definitions and terms of the existing financial covenants, including the definition of the Funded Debt Ratio and the compliance target of the Tangible Capital Ratio.

Both Third Amendment modifications were related to the Vibativ transaction.

Under the Pinnacle Agreement, Cumberland was initially subject to one financial covenant, the maintenance of a Funded Debt Ratio, as such term is defined in the agreement and determined on a quarterly basis.

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 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.

Beginning on August 14, 2018, and continuing until October 7, 2020, the Company and Pinnacle Bank entered into a series of amendments to extend and update the Revolving Credit Note and Revolving Credit Agreement.

The most recent amendment dated October 28, 2021, extends the maturity date three years through October 1, 2024.

Consistent with prior Amendments, the Fifth Amendment provides for a principal balance available for borrowing of up to $ 15 million.

The Company has the right to request an increase of up to an additional $ 5 million providing a maximum principal available of up to $ 20 million upon the satisfaction of certain conditions and with the approval of Pinnacle Bank.

Also consistent with prior Amendments, the Company is required to maintain either a Funded Debt Ratio covenant or a Tangible Capital Ratio covenant.

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 %.

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

The applicable interest rate under the Pinnacle Agreement was 3.65 % at September 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 the Company's assets.

As of September 30, 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 September 30, 2021.

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

Paycheck Protection Program Loan

21 unchanged sentences

(7) INCOME TAXES

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.

As of September 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.

24 unchanged sentences

Contingent consideration earned and accrued in operating expenses 1,134,333

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.

Balance at September 30, 2021

The contingent consideration liability of $ 6.9 million was classified as other current liabilities of $ 2.6 million and other long-term liabilities of $ 4.3 million on the condensed consolidated balance sheet as of September 30, 2021.

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

10 unchanged sentences

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.

This milestone payment will be paid during 2022 and is included as a current liability at September 30, 2021.

Cumberland has approximately $ 2.7 million in net intangible assets related to RediTrex at September 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 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.

Cumberland recorded the first four quarterly installments totaling $ 3.0 million during 2020 and the next three installments totaling $ 1.5 million during the nine months ended September 30, 2021, as discontinued operations.

The Company will record the last remaining quarterly installment in the fourth quarter 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,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

4 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