What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 106 added, 135 removed, 327 unchanged (42% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets:

25 unchanged sentences

100,000,000 shares authorized;

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

14,730,760 and 14,742,754 shares issued and outstanding as of March 31, 2022 and December 31, 2021 , respectively

48,046,764 48,452,906

8 unchanged sentences

Condensed Consolidated Statements of Operations

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

2021 2020 2021 2020

Three months ended March 31,

Net revenues $ 11,175,045 $ 10,537,159

8 unchanged sentences

Interest income 16,041 5,426

Other income — — 2,187,140 —

Interest expense ( 119,575 ) ( 24,417 )

20 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

5 unchanged sentences

Share-based compensation 159,901 162,960

Decrease in non-cash contingent consideration ( 632,646 ) ( 806,390 )

Increase (decrease) in non-cash contingent consideration 370,464 ( 280,020 )

Decrease (increase) in cash surrender value of life insurance policies over premiums paid 222,209 ( 76,300 )

Noncash interest expense 33,943 36,197

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

Decrease (increase) in noncash interest expense 2,183 13,833

Net changes in assets and liabilities affecting operating activities:

4 unchanged sentences

Other long-term liabilities ( 371,214 ) ( 299,937 )

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

Net cash provided by (used in) operating activities from continuing operations ( 150,498 ) 1,290,139

Discontinued operations — 495,410

Net cash provided by operating activities 4,382,763 4,561,140

Net cash provided by (used in) operating activities ( 150,498 ) 1,785,549

Cash flows from investing activities:

Additions to property and equipment ( 26,986 ) ( 19,458 )

Proceeds from surrender of life insurance policies — 460,888

Note receivable investment funding — ( 200,000 )

Cash paid for acquisitions ( 13,500,000 ) —

Additions to intangible assets ( 14,912 ) ( 98,883 )

4 unchanged sentences

Cash payment of contingent consideration ( 501,505 ) ( 995,277 )

Repurchase of subsidiary shares from noncontrolling interest — ( 800,000 )

Repurchase of common shares ( 580,130 ) ( 302,802 )

Net cash used in financing activities ( 2,818,230 ) ( 4,685,477 )

Net cash provided by (used in) financing activities 3,918,365 ( 1,298,079 )

Net increase (decrease) in cash and cash equivalents ( 9,774,031 ) 169,129

10 unchanged sentences

Repurchase of common shares ( 91,724 ) ( 303,088 ) — — ( 303,088 )

Net loss — — ( 1,055,620 ) ( 9,525 ) ( 1,065,145 )

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

Net income (loss) — — 166,828 ( 22,167 ) 144,661

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

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

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

5 unchanged sentences

Balance, March 31, 2022 14,730,760 $ 48,046,764 $ ( 7,023,853 ) $ ( 229,508 ) $ 40,793,403

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

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.

4 unchanged sentences

Cumberland Pharmaceuticals Inc.

(“Cumberland,” the “Company,” or as used in the context of “we,” “us,” or “our”) is a specialty pharmaceutical company focused on the acquisition, development and commercialization of branded prescription products.

The Company's primary target markets are hospital acute care, gastroenterology and rheumatology.

These medical specialties are characterized by relatively concentrated prescriber bases that the Company believes can be penetrated effectively by small, targeted sales forces.

The Company's primary target markets are hospital acute care, oncology, gastroenterology and rheumatology.

These medical specialties are characterized by relatively concentrated prescriber bases that the Company believes can be served effectively by small, targeted sales forces.

Cumberland is dedicated to providing innovative products that improve quality of care for patients and address unmet or poorly met medical needs.

The Company promotes its approved products through its hospital and field sales forces in the United States and is establishing a network of international partners to bring its medicines to patients in their countries.

The Company promotes its approved products through its hospital, oncology and field sales forces in the United States.

We are continuing to build a network of international partners to register and provide our medicines to patients in their countries.

Cumberland focuses its resources on maximizing the commercial potential of its products, as well as developing new product candidates, and has both internal development and commercial capabilities.

5 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, 2021 (the “2021 Annual Report on Form 10-K”).

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.

The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

Discontinued Operations

3 unchanged sentences

Refer to Note 9, for additional information.

Revision of prior period condensed consolidated statement of cash flows presentation

The Company has made a revision to prior period amounts to conform to the current year presentation of the cash surrender value of life insurance policies over premiums paid on the condensed consolidated statement of cash flows.

The revised amounts were previously included as net changes in assets affecting operating activities.

These revisions have no net effect on the reported net cash provided by operating activities nor any impact on the reported operating results or balance sheet for the 2020 period presented.

COVID-19 Pandemic

4 unchanged sentences

All of the Company's employees have been given the opportunity to work remotely, and those that wish to work from Cumberland's office and laboratories are encouraged to practice the behaviors outlined by the Centers for Disease Control.

Throughout the pandemic, Cumberland has faced the same headwinds affecting other companies that rely on hospital admissions and patient visits to drive revenue.

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 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.

Throughout the pandemic, Cumberland has faced the same challenges affecting other companies that rely on hospital admissions and patient visits to drive revenue.

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

During 2020, 2021 and the three months ended March 31, 2022, we carefully monitored our supply chain, 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.

However, we are fortunate to have a diversified product portfolio, with other brands delivering a strong performance.

However, we are fortunate to have a diversified product portfolio, with other brands delivering a strong performance during the pandemic.

Cumberland relies on third-party organizations around the world to supply components, manufacture and distribute its products.

24 unchanged sentences

The Company's most significant estimates include:

(1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) valuation of a contingent consideration liability associated with a business combination.

(1) its allowances for chargebacks and accruals for rebates and product returns, (2) the allowances for obsolescent or unmarketable inventory and (3) valuation of contingent consideration liabilities associated with business combinations.

Operating Segments

5 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 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 )

Discontinued operations 496,787 777,916

Net income (loss) ( 1,086,693 ) ( 497,704 )

Net (income) loss at subsidiary attributable to noncontrolling interest 31,415 15,967

Net income (loss) attributable to common shareholders $ ( 1,055,278 ) $ ( 481,737 )

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

Dilutive effect of other securities — —

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

Nine months ended September 30,

The following table reconciles the numerator and denominator used to calculate diluted earnings (loss) per share for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Net income (loss) from continuing operations $ ( 1,402,433 ) $ ( 350,749 )

6 unchanged sentences

Weighted-average shares outstanding – diluted 14,691,623 15,244,146

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.

As of March 31, 2022 and 2021, restricted stock awards and options to purchase 131,225 and 215,600 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 nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

The Company’s net revenues consisted of the following for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Kristalose $ 3,945,097 $ 2,994,378

Sancuso 3,397,209 —

Vibativ 2,501,434 5,052,243

6 unchanged sentences

Total net revenues $ 11,175,045 $ 10,537,159

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 Omeclamox-Pak revenue for the first quarter of 2022 and 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.

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.

In the first quarter of 2022, the amounts noted were normal adjustments by channel partners.

Net revenue was impacted by product return adjustments.

With regard to Vaprisol, we are in the process of transitioning to a new manufacturer and expect FDA approval later this year.

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 $ 0.02 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.

Grant revenue from these programs totaled approximately $ 0.04 million and $ 0.1 million for the three months ended March 31, 2022 and 2021, 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 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.

At March 31, 2022 and December 31, 2021, the Company had recognized and maintained cumulative net realizable value charges for potential obsolescence and discontinuance losses of approximately $ 0.6 million and $ 1.4 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 September 30, 2021 and December 31, 2020.

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

API for the Company's Vaprisol brand is also included in the raw materials inventory at March 31, 2022 and December 31, 2021.

Consigned inventory represents Authorized Generic inventory stored with our partner 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 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

For the Sancuso acquisition, Cumberland acquired $ 3.0 million of work in progress non-current inventory.

At March 31, 2022 and December 31, 2021, total non-current inventory, including Vibativ, Sancuso and our clinical trial drug ifetroban, was $ 10.6 million and $ 9.0 million, respectively.

The Company had $ 0.2 million and $ 0.5 million of Vibativ finished goods included in non-current inventory at March 31, 2022 and December 31, 2021, respectively.

The Company also has obtained $ 0.2 million and $ 0.4 million of finished goods in non-current inventory for API related to its ifetroban clinical initiatives at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022 and December 31, 2021 the Company's net inventories consisted of the following:

March 31, 2022 December 31, 2021

Raw materials and work in process $ 15,004,954 $ 12,374,983

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 September 30, 2021 is 1.2 years.

The weighted-average remaining lease term at March 31, 2022 is 0.8 years.

On November 15, 2021, Cumberland entered into a lease, pursuant to which the Company will lease approximately 16,631 rentable square feet of space (the “Leased Premise”) at the new development Broadwest located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC.

The Leased Premise will serve as the Company's new corporate headquarters.

The initial term of the Lease is one hundred fifty-seven ( 157 ) months, with two consecutive options to renew for a period of five years each, and will commence on the earlier of November 1, 2022, the date on which Cumberland takes occupancy of the Leased Premise, or the date which Cumberland receives a temporary or permanent certificate of occupancy for the Leased Premise.

Lease Position

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

At March 31, 2022 and December 31, 2021, the Company's lease assets and liabilities were as follows:

Right-of-Use Assets March 31, 2022 December 31, 2021

Operating lease right-of-use assets $ 761,177 $ 1,024,200

Lease Liabilities September 30, 2021 December 31, 2020

Lease Liabilities March 31, 2022 December 31, 2021

Operating lease current liabilities $ 766,488 $ 969,677

1 unchanged sentence

Total $ 789,200 $ 1,059,693

Cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 0.1 million and will be paid through the leases ending in October 2022 and April 2023.

Excluding the Broadwest agreement, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 0.1 million and will be paid through the leases ending in October 2022 and April 2023.

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 September 30, 2021

Maturity of Lease Liabilities at March 31, 2022

Operating Leases

2021 $ 295,038

2022 1,019,313

Total lease payments 823,306

3 unchanged sentences

Rent expense and sublease income were as follows:

Nine months ended September 30,

Three months ended March 31,

Rent expense $ 285,963 $ 227,395

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 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.

During the three months ended March 31, 2022 and March 31, 2021, the Company repurchased 174,149 shares and 91,724 shares of common stock for approximately $ 0.6 million and $ 0.3 million, respectively.

At March 31, 2022, approximately $ 4.2 million of common shares was left to repurchase under this program.

Share purchases and sales

1 unchanged sentence

These purchases are designed to increase ownership in the Company by the members of the Board.

These purchases began in April 2022.

In November 2017, Cumberland filed a Shelf Registration on Form S-3 with the SEC associated with the sale of up to $ 100 million in corporate securities.

4 unchanged sentences

The Company filed an updated Form S-3 with the SEC in December 2020, which was declared effective in January 2021.

The Company does not currently have an ATM feature in place.

Cumberland plans to continue to evaluate the market for its common shares, and if favorable, will further evaluate whether or not to enter into an ATM feature through B.

On December 27, 2021, the Company filed a related prospectus supplement in connection with the sale and issuance of shares having an aggregate gross sales price of up to $ 19 million.

The Company intends to continue an ATM feature through B.

Riley FBR, Inc.

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

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

The Company did not issue any shares under an ATM during the three months ended March 31, 2022 or March 31, 2021.

Restricted Share Grants and Incentive Stock Options

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.

During the three months ended March 31, 2022 and March 31, 2021, the Company issued 65,225 shares and 35,850 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 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.

During the three months ended March 31, 2022 and 2021, the Company also issued 166,350 and 172,350 incentive stock options, respectively, to employees that cliff-vest on the fourth anniversary of the date of grant, that are set to expire in March 2032 and 2031.

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

Debt Agreement

On March 31, 2022, the Company and Pinnacle Bank entered into a Seventh Amendment to the Revolving Credit Loan Agreement (the "Pinnacle Agreement") to revise and update the Maximum Funded Debt Ratio financial covenant and to delete from the Pinnacle Agreement the Funded Debt to Tangible Capital Ratio financial covenant.

These changes were made to more appropriately reflect the impact from the Sancuso acquisition.

On December 31, 2021, the Company and Pinnacle Bank entered into the Fifth Amendment to the Revolving Credit Note and the Sixth Amendment to the Revolving Credit Loan Agreement in order to increase the principal amount of the Note from $ 15 million to $ 20 million.

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.

1 unchanged sentence

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 Fifth Amendment extends the maturity date three years through October 1, 2024.

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 September 30, 2021.

The current pricing under the Pinnacle Agreement 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 March 31, 2022.

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.

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.

The parties have agreed on a process to determine a new interest rate benchmark at the point the LIBOR rate is expected to be discontinued over the next 12 to 24 months.

As of March 31, 2022 and December 31, 2021, the Company had $ 20.0 million and $ 15.0 million, respectively, in borrowings outstanding under its revolving credit facility.

The Company was in compliance with the Maximum Funded Debt Ratio financial covenant as of March 31, 2022.

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

Paycheck Protection Program Loan

On April 20, 2020, Cumberland received the funding of a loan from Pinnacle Bank in the amount of $ 2,187,140 pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted March 27, 2020.

The PPP is administered by the U.S.

Small Business Administration ("SBA").

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 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 first quarter 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.

and Cumberland Emerging Technologies.

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

and Cumberland Emerging Technologies Inc.

(7) INCOME TAXES

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.

As of March 31, 2022, the Company has approximately $ 56.6 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.

14 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 % of on-going 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 after the $ 2.5 million threshold is met.

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 —

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.

Balance at March 31, 2022

The contingent consideration liability of $ 6.4 million was accounted for as $ 2.3 million of other current liabilities and $ 4.1 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2022.

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 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 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.

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

This milestone payment is payable during 2022 and is included as a current liability at March 31, 2022.

Cumberland has approximately $ 2.6 million in net intangible assets related to RediTrex at March 31, 2022.

Sancuso Acquisition

On January 3, 2022, Cumberland acquired the FDA-approved oncology-supportive care medicine Sancuso from Kyowa Kirin, Inc., the U.S.

affiliate of Japan-based Kyowa Kirin Co., Ltd.

Sancuso is the first and only FDA-approved prescription patch for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment.

The active drug in Sancuso, granisetron, slowly dissolves in the thin layer of adhesive that sticks to the patient’s skin and is released into their bloodstream over several days, working continuously to prevent chemotherapy-induced nausea and vomiting (“CINV”).

It is applied 24 to 48 hours before receiving chemotherapy and can prevent CINV for up to five consecutive days.

Alternative oral treatments must be taken several times (day and night) to deliver the same therapeutic doses.

Cumberland acquired U.S.

rights to Sancuso and assumed full commercial responsibility for the product – including its marketing, promotion, distribution, manufacturing and medical support activities.

Cumberland has accounted for the transaction as a business combination in accordance with ASC 805 and the product sales are included in the results of operations subsequent to the acquisition date.

The Company made an upfront payment of $ 13.5 million at the closing of the transaction.

The Agreement calls for milestone payments of up to $ 3.5 million based on the attainment of various approvals and sales performance.

The Company believes that $ 1.5 million of the milestone payments will be earned and paid.

In addition, Cumberland has agreed to pay a royalty of up to 10 % of on-going net sales of the product.

Cumberland has prepared a preliminary valuation of the contingent consideration liability utilizing significant unobservable inputs.

As a result, the valuation is classified as Level 3 fair value measurement.

The acquisition was funded by cash and the Company's revolving credit facility.

The Company is working with an outside consultant firm to finalize the Sancuso valuation of the transaction which will be completed later this year.

The estimates of fair value for the more significant assets and liabilities assumed were prepaid expenses $ 0.3 million, inventory $ 5.2 million, goodwill $ 1.0 million, intangible assets $ 12.1 million, milestone payable $ 1.2 million and contingent liability $ 3.9 million.

The contingent consideration liability earned and accrued in operating expenses is paid to Kyowa Kirin quarterly.

The contingent consideration liability of $ 3.9 million was accounted for as $ 1.3 million of current liabilities and $ 2.6 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2022.

Ethyol and Totect

5 unchanged sentences

Under the final terms of the Dissolution Agreement, Cumberland was no longer responsible for the distribution, marketing and promotion of either Ethyol or Totect or any competing products after December 31, 2019.

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 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.

In exchange for the return of these product license rights and the non-compete provisions of the Dissolution Agreement, Cumberland received $ 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 final four installments totaling $ 2.0 million during 2021 , as discontinued operations.

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

December 31, 2019, as the transition date, was the final day Cumberland was responsible for the products.

2 unchanged sentences

The dissolution payments from Clinigen are reflected as revenue from discontinued operations.

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

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

2021 2020 2021 2020

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

Three months ended March 31,

Revenues $ — $ 495,410

Costs of products sold — — — —

Selling, Marketing and other — — — —

Income from discontinued operations $ — $ 495,410

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