What changed in this filing

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Item 1. Financial Statements

2023-08-11 compared with 2023-05-12 · 131 added, 108 removed, 328 unchanged (42% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets:

21 unchanged sentences

Total liabilities 52,538,458 56,951,152

Commitments and contingencies

Shareholders’ equity:

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100,000,000 shares authorized;

14,430,047 and 14,366,316 shares issued and outstanding as of March 31, 2023 and December 31, 2022 , respectively

14,330,990 and 14,366,616 shares issued and outstanding as of June 30, 2023 and December 31, 2022 , respectively

47,303,429 47,474,973

Retained earnings (deficit) ( 11,016,657 ) ( 11,208,841 )

Accumulated deficit ( 10,144,457 ) ( 11,208,841 )

Total shareholders’ equity 37,158,972 36,266,132

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Condensed Consolidated Statements of Operations

Three months ended March 31,

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

2023 2022 2023 2022

Net revenues $ 10,888,877 $ 10,299,152 $ 20,113,515 $ 21,474,197

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Other income 981,806 — 2,828,871 —

Other income - gain on insurance proceeds — 611,330 — 611,330

Interest expense ( 192,635 ) ( 137,624 ) ( 378,988 ) ( 257,199 )

Income (loss) before income taxes 869,091 ( 1,357,766 ) 1,048,315 ( 2,753,299 )

Income tax (expense) benefit ( 6,938 ) ( 6,900 )

Income tax expense ( 6,937 ) ( 6,900 ) ( 13,875 ) ( 13,800 )

Net income (loss) 862,154 ( 1,364,666 ) 1,034,440 ( 2,767,099 )

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Condensed Consolidated Statements of Cash Flows

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

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Increase in noncash interest expense 7,809 4,791

Gain on receivable of FDA fees ( 1,847,065 ) —

Gain on receivable of life insurance proceeds — ( 611,330 )

Net changes in assets and liabilities affecting operating activities:

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Other long-term liabilities 259,926 ( 1,688,143 )

Net cash used in operating activities ( 1,418,209 ) ( 150,498 )

Net cash provided by operating activities 3,817,152 2,180,038

Cash flows from investing activities:

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Condensed Consolidated Statements of Equity

Common stock Retained earnings (deficit) Noncontrolling interests Total equity

Common stock Accumulated deficit Noncontrolling interests Total equity

Shares Amount

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

Common stock Retained earnings (deficit) Noncontrolling interests Total equity

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

Share-based compensation 2,250 ( 27,753 ) — — ( 27,753 )

Repurchase of common shares ( 83,317 ) ( 196,692 ) — — ( 196,692 )

Net loss — — ( 1,335,620 ) ( 29,046 ) ( 1,364,666 )

Balance, June 30, 2022 14,649,693 $ 47,822,319 $ ( 8,359,473 ) $ ( 258,554 ) $ 39,204,292

Common stock Accumulated deficit Noncontrolling interests Total equity

Shares Amount

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Balance, March 31, 2023 14,430,047 $ 47,377,168 $ ( 11,016,657 ) $ ( 312,024 ) $ 36,048,487

Share-based compensation — 97,877 — — 97,877

Repurchase of common shares ( 99,057 ) ( 171,616 ) — — ( 171,616 )

Net income (loss) — — 872,200 ( 10,046 ) 862,154

Balance, June 30, 2023 14,330,990 $ 47,303,429 $ ( 10,144,457 ) $ ( 322,070 ) $ 36,836,902

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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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 has also established international partnerships and continues to build a network of companies outside the U.S.

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.

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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, 2022 (the “2022 Annual Report on Form 10-K”).

The results of operations for the three months ended March 31, 2023, 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, 2023, are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

Recent Accounting Guidance

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies are required to use a new forward-looking “expected loss” model that generally result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, companies measure credit losses in a manner similar to what they do today, except that the losses are recognized as allowances rather than as reductions in the amortized cost of the securities.

For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies are required to use a new forward-looking “expected loss” model that generally results in an earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, companies measure credit losses in a manner similar with previous guidance, except that the losses are recognized as allowances rather than as reductions in the amortized cost of the securities.

Companies have to disclose additional information, including information they use to track credit quality by year of origination for most financing receivables.

Companies apply the ASU’s provisions as a cumulative-effect adjustment, if any, to retained earnings (deficit) as of the beginning of the first reporting period in which the guidance is adopted.

Companies apply the ASU’s provisions as a cumulative-effect adjustment, if any, to the accumulated deficit as of the beginning of the first reporting period in which the guidance is adopted.

Related to ASU No.

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The Company adopted both ASU 2016-13 and ASU 2019-05 on January 1, 2023.

Please refer to Trade and Notes Receivables Policy .

Please refer to Trade and Notes Receivables Policy below.

Accounting Policies:

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All bank balances are maintained in cash or money market funds.

Therefore for the Company, this principally relates to trade receivables and two note receivables.

Therefore for the Company, this principally relates to trade receivables and two notes receivable.

CECL also requires the measurement of expected credit losses on a collective (pool) basis when similar risk characteristics exist.

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The Company reviews all balances over 90 days past due for a possible reserve and considers any specific factors or information for balances aged under 90 days if there are indicators that the balance should be reserved, such as other aged balances with the customer or bankruptcy as well as any economic issues with a customer industry or region.

The adoption of ASC 326 did not result in a material impact to the company.

The adoption of Accounting Standards Codification ("ASC") 326 did not result in a material impact to the Company.

(2) EARNINGS (LOSS) PER SHARE

The following table reconciles the numerator and denominator used to calculate basic and diluted earnings (loss) per share for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

Net income (loss) $ 172,286 $ ( 1,402,433 )

Net loss at subsidiary attributable to noncontrolling interest 19,898 17,180

The following table reconciles the numerator and denominator used to calculate basic and diluted earnings (loss) per share for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30,

Net income (loss) attributable to common shareholders $ 872,200 $ ( 1,335,620 )

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Weighted-average shares outstanding – diluted 14,554,264 14,688,505

As of March 31, 2023 and 2022, restricted stock awards and options to purchase 331,338 and 131,225 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) attributable to common shareholders $ 1,064,384 $ ( 2,720,873 )

Weighted-average shares outstanding – basic 14,376,260 14,689,798

Dilutive effect of other securities 194,538 —

Weighted-average shares outstanding – diluted 14,570,798 14,689,798

As of June 30, 2023 and 2022, restricted stock awards and options to purchase 413,074 and 289,975 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, 2023 and 2022:

Three months ended March 31,

The Company accounts for revenues from contracts with customers under ASC 606.

The Company’s net revenues consisted of the following for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

Kristalose $ 4,110,718 $ 3,570,272 $ 8,425,846 $ 7,515,368

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Total net revenues $ 10,888,877 $ 10,299,152 $ 20,113,515 $ 21,474,197

The Omeclamox-Pak net revenue for the first quarter of 2023 and 2022 was the result of Cumberland currently being out of commercial inventory of this product.

The Omeclamox-Pak net revenue for the second quarter of 2023 was impacted by our 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.

In the first quarter of 2023, the amounts noted were normal adjustments by channel partners.

With regard to Vaprisol, we are in the process of transitioning to a new manufacturer, who was issued an FDA Form 483 in the second quarter of 2022.

Once these 483 related issues are satisfactorily resolved by the manufacturing plant, we will then resubmit our application to the FDA for approval.

Net revenue was positively impacted by product return adjustments.

They are under new management and we are awaiting a potential resumption of supply.

For the three and six months ended June 30, 2023 and 2022, the amounts noted resulted from normal adjustments by channel partners.

With regard to Vaprisol, we are in the process of transitioning to a new manufacturer, who was issued a U.S.

Food and Drug Administration ("FDA") Form 483 in the second quarter of 2022.

Once these FDA Form 483 related issues are satisfactorily resolved by the manufacturer, we will then resubmit our application for their facility to the FDA for approval.

For the three and six months ended June 30, 2023 and 2022, net revenue was impacted by product return and accrual adjustments.

Other Revenues

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Other revenues also include funding from federal grant programs including those secured from the FDA and from those secured by Cumberland Emerging Technologies Inc.

("CET") through the Small Business Administration as well as lease income generated by CET’s Life Sciences Center.

("CET") through the Small Business Administration.

Grant revenue from these federal grant programs totaled approximately $ 0.06 million and $ 0.04 million for the three months ended June 30, 2023 and 2022, respectively, and approximately $ 0.1 million and $ 0.08 million for the six months ended June 30, 2023 and 2022, respectively.

Also in the second quarter of 2023, the Company received $ 1.0 million relating to a litigation settlement based on two $ 500,000 milestone payments due to us for the license associated with our Vibativ product.

Included in other revenue is lease income generated by CET’s Life Sciences Center.

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 federal grant programs totaled approximately $ 0.1 million and $ 0.04 million for the three months ended March 31, 2023 and 2022, respectively .

This lease income, as noted in Footnote 5 - Leases, was approximately $ 0.1 million and $ 0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $ 0.2 million and $ 0.3 million for the six months ended June 30, 2023 and 2022, respectively.

(4) INVENTORIES

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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, 2023, there were no cumulative obsolescence and discontinuance losses necessary.

At June 30, 2023, there were no cumulative obsolescence and discontinuance losses necessary.

At December 31, 2022, the Company had recognized and maintained cumulative net realizable value charges for potential obsolescence and discontinuance losses of approximately $ 0.5 million.

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

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

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, 2023 and December 31, 2022.

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

Consigned inventory represents Authorized Generic inventory stored with our partner until shipment.

As part of the Vibativ acquisition, the Company 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, 2023 and December 31, 2022, total non-current inventory, including Vibativ and our clinical trial drug ifetroban, was $ 7.5 million for each period.

The Company had Vibativ finished goods of $ 0.9 million included in non-current inventory at March 31, 2023, and no non-current inventory at December 31, 2022.

The Company also had $ 0.3 million in non-current inventory for API related to its ifetroban clinical initiatives at March 31, 2023 and December 31, 2022, and $ 0.2 million and $ 0.1 million of finished goods, respectively.

At March 31, 2023 and December 31, 2022, the Company's net inventories consisted of the following:

March 31, 2023 December 31, 2022

At June 30, 2023 and December 31, 2022, total non-current inventory, including Vibativ and our clinical trial drug ifetroban, was $ 6.7 million and $ 7.5 million, respectively.

The Company had Vibativ finished goods of $ 0.9 million included in non-current inventory at June 30, 2023, and no non-current inventory at December 31, 2022.

The Company also had $ 0.3 million in non-current inventory for API related to its ifetroban clinical initiatives at June 30, 2023 and December 31, 2022, and $ 0.2 million and $ 0.1 million of finished goods, respectively.

At June 30, 2023 and December 31, 2022, the Company's net inventories consisted of the following:

June 30, 2023 December 31, 2022

Raw materials and work in process $ 12,859,432 $ 12,899,659

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Total inventories classified as current $ 10,928,406 $ 9,863,581

On November 15, 2021, Cumberland entered into a lease, pursuant to which the Company leases approximately 16,903 rentable square feet of space at the new development Broadwest located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC.

On November 15, 2021, Cumberland entered into a lease (the "Lease"), pursuant to which the Company leases approximately 16,903 rentable square feet of space (the "Leased Premise") at Broadwest located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC (the "Landlord").

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

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The Company is responsible for paying rent to the Landlord under the Lease beginning three months after the commencement date.

The Company pays a base rent of $ 33.06 per square foot of rentable space with a gradual rental rate increase of 2.5 % for each year period thereafter of the prior year's base rental.

The Company pays a base rent of $ 33.06 per square foot of rentable space with a gradual rental rate increase of 2.5 % for each year thereafter of the prior year's base rental.

In addition to the monthly base rent, the Company is responsible for its percentage share of the operating expenses of the building.

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In addition, 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.

The research lab space at CET, under an agreement amended in July 2012, is leased through April 2023, with an option to extend the lease through April 2028.

The Company also subleases a portion of the space under these leases.

The research lab space at CET, under an agreement amended in July 2012, is leased through April 2028.

The Company also subleases a portion of the space under this lease.

Operating lease liabilities were recorded as the present value of remaining lease payments not yet paid for the lease term discounted using the incremental borrowing rate associated with each lease.

Operating lease right-of-use assets represent operating lease liabilities adjusted for lease incentives and initial direct costs.

As the Company’s leases do not contain implicit borrowing rates, the incremental borrowing rates were calculated based on information available at January 1, 2019 and October 25, 2022.

As the Company’s leases do not contain implicit

borrowing rates, the incremental borrowing rates were calculated based on information available at January 1, 2019 and October 25, 2022.

Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms.

The weighted-average remaining lease term for the Broadwest lease is 12.62 years at March 31, 2023.

The weighted-average remaining lease term for the Broadwest and CET leases is 10.9 years at June 30, 2023.

The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments is 9.28 % for the Broadwest lease and 9.9 % for the remaining CET lease.

Also included as a ROU asset is an embedded lease of $ 0.9 million related to our new manufacturer for Vaprisol.

Lease Position

At March 31, 2023 and December 31, 2022, the Company's lease assets and liabilities were as follows:

Right-of-Use Assets March 31, 2023 December 31, 2022

At June 30, 2023 and December 31, 2022, the Company's lease assets and liabilities were as follows:

Right-of-Use Assets June 30, 2023 December 31, 2022

Operating lease right-of-use assets $ 6,831,502 $ 5,218,403

Lease Liabilities March 31, 2023 December 31, 2022

Lease Liabilities June 30, 2023 December 31, 2022

Operating lease current liabilities $ 320,837 $ 172,910

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Total $ 5,797,877 $ 4,759,211

As of March 31, 2023, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 0.03 million and will be paid through the leases ending in April 2023.

As of June 30, 2023, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 1.8 million and will be paid through the leases ending in April 2028.

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, 2023

Maturity of Lease Liabilities at June 30, 2023

Operating Leases

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Rent expense and sublease income were as follows:

Three months ended March 31,

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

2023 2022 2023 2022

Rent expense $ 226,772 $ 285,963 $ 501,029 $ 574,071

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Share repurchases

Cumberland currently has a share repurchase program to repurchase up to $ 10 million of its common stock pursuant to Rule 10b-18 of the Securities Exchange Act of 1934.

Cumberland currently has a share repurchase program available to repurchase up to $ 10 million of its common stock pursuant to Rule 10b-18 of the Securities Exchange Act of 1934.

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, 2023 and March 31, 2022, the Company repurchased 86,829 shares and 174,149 shares of common stock for approximately $ 0.2 million and $ 0.6 million, respectively.

At March 31, 2023, approximately $ 3.6 million of common shares was left to repurchase under this program.

During the six months ended June 30, 2023 and June 30, 2022, the Company repurchased 185,886 shares and 257,466 shares of common stock for approximately $ 0.4 million and $ 0.8 million, respectively.

At June 30, 2023, approximately $ 3.4 million was available for the repurchase of common shares under this program.

Share purchases and sales

In the Company's May 2023 trading window, several members of Cumberland's Board of Directors will enter into share purchase agreements of the Company's stock pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934.

In the Company's May 2023 trading window, several members of Cumberland's Board of Directors entered into agreements for trading plans to purchase shares of the Company's stock pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934.

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

Purchases of shares through these plans are expected to begin in August 2023.

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.

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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, 2023 or March 31, 2022.

The Company did not issue any shares under an ATM during the six months ended June 30, 2023 or June 30, 2022.

Restricted Share Grants and Incentive Stock Options

During the three months ended March 31, 2023 and March 31, 2022, the Company issued 28,250 shares and 65,225 shares of restricted stock to employees, advisors and directors, respectively.

During the six months ended June 30, 2023 and June 30, 2022, the Company issued 34,250 shares and 65,225 shares of restricted stock, respectively, to employees, advisors and directors.

Restricted stock issued to employees and advisors 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, 2023 and 2022, the Company also issued 183,250 and 166,350 incentive stock options, respectively, to employees that cliff-vest on the fourth anniversary of the date of grant, that are set to expire in 2033 and 2032, respectively.

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

For the three months ended March 31, 2023, we recorded a credit of $ 0.04 million to share-based compensation related to the forfeiture of unvested restricted stock awards.

During the six months ended June 30, 2023 and 2022, the Company also issued 184,500 and 169,800 incentive stock options, respectively, to employees that cliff-vest on the fourth anniversary of the date of grant, and are set to expire in 2033 and 2032, respectively.

Stock compensation expense is presented as a component of general and administrative expense in the condensed consolidated statements of operations as it relates to these restricted share grants and options.

For the six months ended June 30, 2023, we recorded a credit of $ 0.04 million to stock compensation expense related to the forfeiture of unvested restricted stock awards.

Debt Agreement

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

Among other terms, the Fourth Amendment extended the maturity date to October 1, 2024.

The Pinnacle Agreement includes specific financial covenants.

Among other terms, the Fourth Amendment extended the maturity date to October 1, 2024 and includes a specific financial covenant.

In 2022, the Company and Pinnacle Bank agreed to modify the financial covenants to align with the current use of the line of credit.

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On June 30, 2022, the Company entered into the Eighth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank permitting the Maximum Funded Debt Ratio to be calculated on a rolling four-quarter basis to be no more than 3.00 to 1.00 for the second and third quarters of 2022 and 2.50 to 1.00 for each quarter thereafter.

On September 29, 2022, the Company entered into the Ninth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank (as amended, the "Pinnacle Agreement") to update the Funded Debt Ratio to mean the ratio of (i) Funded Debt less the amount of Unrestricted Cash in excess of $ 8,500,000 , to (ii) EBITDA, as determined at the end of each fiscal quarter on a rolling four ( 4 ) quarter basis.

For the quarter ended March 31, 2023, we were in compliance with the Funded Debt Ratio financial covenant.

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

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 7.375 % at March 31, 2023.

fiscal quarter on a rolling four ( 4 ) quarter basis.

For the quarter ended June 30, 2023, we were in compliance with the Funded Debt Ratio financial covenant.

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

The 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 8.0 % at June 30, 2023.

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.

The LIBOR rate will no longer be used as of June 30, 2023, at which time the benchmark rate will be changed from LIBOR to Term SOFR.

As of March 31, 2023 and December 31, 2022, the Company had $ 16.1 million and $ 16.2 million, respectively, in borrowings outstanding under its revolving credit facility.

The LIBOR rate is no longer used as of June 30, 2023, at which time the benchmark rate was changed from LIBOR to Term SOFR.

As of June 30, 2023 and December 31, 2022, the Company had $ 13.1 million and $ 16.2 million, respectively, in borrowings outstanding under its revolving credit facility.

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

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(7) INCOME TAXES

As of March 31, 2023, the Company has approximately $ 57.8 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, 2023, the Company has approximately $ 53.1 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.

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(8) OTHER INCOME

The Company realized a $ 1.8 million gain in the first quarter of 2023 for previously paid prescription drug fees.

In March 2023, the Company was granted a barrier-to-innovation waiver from the FDA for the fiscal year 2022 RediTrex prescription drug fees resulting in a refund of $ 1.8 million.

This refund is expected to be paid in second quarter of 2023.

The Company realized a $ 2.8 million gain in the first six months of 2023 for previously paid FDA prescription drug fees.

In March 2023, the Company was granted a barrier-to-innovation waiver from the FDA for certain fiscal year 2022 prescription drug fees resulting in a refund of $ 1.8 million.

In June 2023, the Company was granted another waiver from the FDA for the fiscal year 2023 fees in the amount of $ 1.0 million.

Both of these refunds were paid by the FDA in second quarter of 2023.

(9) COLLABORATIVE AGREEMENTS

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The Company does not believe that the disposition or ultimate resolution of existing claims or lawsuits will have a material adverse effect on the business or financial condition of the Company.

(11) ADDITIONS AND RETURN OF PRODUCT RIGHTS

(11) PRODUCT ACQUISITIONS AND RETURN OF PRODUCT RIGHTS

During November 2018, the Company closed on an agreement with Theravance Biopharma ("Theravance") to acquire the global responsibility for Vibativ including the marketing, distribution, manufacturing and regulatory activities associated with the brand.

Vibativ is a patented, Food and Drug Administration ("FDA") approved injectable anti-infective for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin structure infections.

Vibativ is a patented, FDA approved injectable anti-infective for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin structure infections.

It addresses a range of Gram-positive bacterial pathogens, including those that are considered difficult-to-treat and multidrug-resistant.

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Contingent consideration earned and accrued in operating expenses 292,232

Balance at March 31, 2023

The contingent consideration liability of $ 4.1 million was accounted for as $ 1.2 million of other current liabilities and $ 2.9 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2023.

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

("Nordic") to acquire the exclusive U.S.

rights to Nordic’s injectable methotrexate product line designed for the treatment of active rheumatoid arthritis, juvenile idiopathic arthritis, severe psoriatic arthritis, and severe disabling psoriasis.

As consideration for the license, Cumberland paid a deposit of $ 100,000 at closing.

The Company provided $ 0.9 million in consideration through a grant of 180,000 restricted shares of Cumberland common stock to be vested upon the FDA approval of the first Nordic product.

Cumberland also agreed to provide Nordic a series of payments tied to the products’ FDA approval, launch and achievement of certain sales milestones.

Under the terms of the agreement, Cumberland is responsible for the product registration and commercialization in the U.S.

Nordic is responsible for product manufacturing and supply.

On November 27, 2019, Cumberland received FDA approval for the first Nordic injectable product and authorization to market them under the RediTrex brand name.

The 180,000 shares of restricted Cumberland common stock previously provided to Nordic vested upon approval and were valued at $ 0.9 million on the vesting date.

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 took place in late 2021 resulted in a $ 1.0 million milestone payment due to Nordic.

Effective July 12, 2022, the Company entered into an amendment to our agreement with Nordic whereby they may assume responsibility for RediTrex marketing authorization in the U.S.

and the opportunity to commercialize the product in the U.S.

after June 30, 2023.

Cumberland will continue to distribute and support the product until then.

In accordance with the terms of the amendment, Nordic has returned the 180,000 restricted Cumberland shares we previously issued to Nordic which were cancelled, refunded to Cumberland the milestone payment of $ 1.0 million we made associated with the brand's U.S.

approval and issued a credit note in favor of the Company in the amount of $ 1.0 million for the unpaid milestone payment due from us for launch of the product line.

The companies will cooperate on any transition and Cumberland will receive a long-term royalty on any Nordic sales of the product.

Balance at June 30, 2023

The contingent consideration liability of $ 4.3 million was accounted for as $ 1.6 million of other current liabilities and $ 2.7 million of other long-term liabilities on the condensed consolidated balance sheet as of June 30, 2023.

On January 3, 2022, Cumberland acquired the U.S.

11 unchanged sentences

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 agreement called 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.

5 unchanged sentences

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

The Company worked with an outside consultant to finalize the Sancuso valuation of the transaction.

The fair value for the assets and liabilities assumed were as follows:

prepaid expenses $ 1.8 million, inventory $ 2.6 million, goodwill $ 0.03 million, intangible assets $ 14.1 million, milestone payable $ 1.7 million and contingent liability $ 3.4 million.

prepaid expenses of $ 1.8 million, inventory of $ 2.6 million, goodwill of $ 0.03 million, intangible assets of $ 14.1 million, milestone payable of $ 1.7 million and contingent liability of $ 3.4 million.

The following table presents the changes in the fair value of the contingent consideration liability that is remeasured on a recurring basis.

Balance at December 31, 2022 $ 4,757,000

Cash payment of royalty during the period ( 244,920 )

Cash payment of milestones and royalty during the period ( 1,407,598 )

Change in fair value of contingent consideration included in operating expenses ( 585,792 )

Contingent consideration earned and accrued in operating expenses 352,390

Balance at March 31, 2023

Balance at June 30, 2023

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

The contingent consideration liability of $ 2.5 million was accounted for as $ 1.3 million of current liabilities and $ 1.2 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2023.

The contingent consideration liability of $ 3.1 million was accounted for as $ 1.9 million of current liabilities and $ 1.2 million of other long-term liabilities on the condensed consolidated balance sheet as of June 30, 2023.

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

("Nordic") to acquire the exclusive U.S.

As consideration for the license, Cumberland paid a deposit of $ 100,000 at closing.

The Company provided $ 0.9 million in consideration through a grant of 180,000 restricted shares of Cumberland common stock to be vested upon the FDA approval of the first Nordic product.

Cumberland also agreed to provide Nordic a series of payments tied to the products’ FDA approval, launch and achievement of certain sales milestones.

Under the terms of the agreement, Cumberland was responsible for the product registration and commercialization in the U.S.

Nordic was responsible for product manufacturing and supply.

On November 27, 2019, Cumberland received FDA approval for the first Nordic injectable product and authorization to market them under the RediTrex brand name.

The 180,000 shares of restricted Cumberland common stock previously provided to Nordic vested upon approval and were valued at $ 0.9 million on the vesting date.

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 took place in late 2021 resulting in a $ 1.0 million milestone payment due to Nordic.

Effective July 12, 2022, the Company entered into an amendment to our agreement with Nordic whereby they would assume responsibility for RediTrex marketing authorization in the U.S.

and the opportunity to commercialize the product in the U.S.

after June 30, 2023.

Cumberland continued to distribute and support the product through June 30, 2023.

approval and issued a credit note in favor of the Company in the amount of $ 1.0 million for the unpaid milestone payment due from us for launch of the product line.

The companies will cooperate on any transition and Cumberland will receive a long-term royalty on any Nordic sales of the product.

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