What changed in this filing

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Item 1. Financial Statements

2023-11-13 compared with 2023-08-11 · 121 added, 113 removed, 346 unchanged (40% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets:

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100,000,000 shares authorized;

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

14,217,926 and 14,366,616 shares issued and outstanding as of September 30, 2023 and December 31, 2022 , respectively

47,185,304 47,474,973

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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,

2023 2022 2023 2022

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Total costs and expenses 11,952,529 11,701,660 33,574,863 36,314,394

Operating income (loss) 22,859 ( 1,846,538 ) ( 1,508,819 ) ( 3,138,537 )

Operating loss ( 1,866,603 ) ( 288,588 ) ( 3,375,422 ) ( 3,427,125 )

Interest income 98,603 21,602 205,854 52,709

Other income — — 2,828,871 —

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

Other income - settlement 475,000 — 475,000 —

Other income - insurance proceeds 346,800 — 346,800 611,330

Interest expense ( 110,081 ) ( 149,340 ) ( 489,069 ) ( 406,539 )

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

Loss before income taxes ( 1,056,281 ) ( 416,326 ) ( 7,966 ) ( 3,169,625 )

Income tax expense ( 6,938 ) ( 6,900 ) ( 20,813 ) ( 20,700 )

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

Net loss ( 1,063,219 ) ( 423,226 ) ( 28,779 ) ( 3,190,325 )

Net loss at subsidiary attributable to noncontrolling interests 13,921 14,587 43,865 60,813

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Condensed Consolidated Statements of Cash Flows

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

Net income (loss) $ 1,034,440 $ ( 2,767,099 )

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

Net loss $ ( 28,779 ) $ ( 3,190,325 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization expense 3,702,687 4,816,630

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Decrease in non-cash contingent consideration ( 1,017,712 ) ( 1,051,908 )

Decrease (increase) in cash surrender value of life insurance policies over premiums paid ( 95,997 ) 598,355

Decrease in cash surrender value of life insurance policies over premiums paid 16,357 708,293

Increase in noncash interest expense 11,713 7,608

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

Life insurance proceeds ( 346,800 ) ( 611,330 )

Net changes in assets and liabilities affecting operating activities:

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Additions to property and equipment ( 232,595 ) ( 255,676 )

Settlement of patent litigation — 21,757

Life insurance policy proceeds received — 877,597

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

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

Share-based compensation — 188,449 — — 188,449

Repurchase of common shares ( 33,110 ) ( 78,793 ) — — ( 78,793 )

Net loss — — ( 408,639 ) ( 14,587 ) ( 423,226 )

Balance, September 30, 2022 14,616,583 $ 47,931,975 $ ( 8,768,112 ) $ ( 273,141 ) $ 38,890,722

Common stock Accumulated deficit Noncontrolling interests Total equity

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

Share-based compensation 3,500 83,112 — — 83,112

Repurchase of common shares ( 116,564 ) ( 201,237 ) — — ( 201,237 )

Net loss — — ( 1,049,298 ) ( 13,921 ) ( 1,063,219 )

Balance, September 30, 2023 14,217,926 $ 47,185,304 $ ( 11,193,755 ) $ ( 335,991 ) $ 35,655,558

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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(“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 pharmaceutical products.

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

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, oncology and field sales forces in the United States.

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

We are dedicated to our mission of working together to provide unique products that improve the quality of patient care.

Our primary markets are hospital acute care, gastroenterology and oncology.

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

We promote our approved products through our hospital, oncology and field sales forces in the United States.

We have also established international partnerships and are continuing 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.

The Company’s products are manufactured by third parties, which are overseen by Cumberland’s quality control and manufacturing professionals.

The Company works closely with its hospital, field and oncology sales teams and its third-party distribution partners to make its products available in the United States.

Cumberland’s growth strategy involves maximizing the success of our existing brands, while continuing to add differentiated products.

We have built our portfolio of FDA approved products through both development and acquisition.

Additionally, we look for opportunities to expand our products into new patient populations through clinical trials, improved presentations and our support of select, investigator-initiated studies.

We actively pursue opportunities to acquire additional marketed products, as well as late-stage development product candidates in our target medical specialties.

Our clinical team is developing a pipeline of new product candidates to address poorly met medical needs.

The Company’s products are manufactured by third parties, which are overseen by our quality control and manufacturing professionals.

We work closely with our warehousing and distribution partners to make our products available in the U.S.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a basis consistent with the December 31, 2022, audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly present the information set forth herein.

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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 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.

The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

Recent Accounting Guidance

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The preparation of the condensed consolidated financial statements in conformity with U.S.

generally accepted accounting principles requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.

generally accepted accounting principles requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the period.

Actual results could differ from those estimates under different assumptions and conditions.

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

This may include, either individually or in combination, some of the following characteristics (326-20-55-5):

This may include, either individually or in combination, some of the following characteristics of Accounting Standards Codification ("ASC") (326-20-55-5):

Internal or external credit score/rating

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

The adoption of 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 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 )

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

Three months ended September 30,

Net loss attributable to common shareholders $ ( 1,049,298 ) $ ( 408,639 )

Weighted-average shares outstanding – basic 14,277,229 14,477,478

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Weighted-average shares outstanding – diluted 14,277,229 14,477,478

Six months ended June 30,

Nine months ended September 30,

Net income (loss) attributable to common shareholders $ 15,086 $ ( 3,129,512 )

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Weighted-average shares outstanding – diluted 14,521,600 14,618,975

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.

As of September 30, 2023 and 2022, restricted stock awards and options to purchase 440,389 and 233,750 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.

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,

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

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

2023 2022 2023 2022

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Total net revenues $ 10,085,926 $ 11,413,072 $ 30,199,441 $ 32,887,269

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 Omeclamox-Pak net revenue for the third quarter of 2023 was impacted by our lack 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 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.

For the three and nine months ended September 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.

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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.

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

Other Revenues

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The contractual payments associated with the partner’s achievement of regulatory approvals, sales milestones and royalties on future sales are recognized as revenue upon occurrence, or at such time that the Company has a high degree of confidence that the revenue would not be reversed in a subsequent period.

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

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 that is included in other revenue for the nine months ended September 30, 2023.

Other revenues 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.

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.

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.

Grant revenue from these federal grant programs totaled approximately $ 0.1 million and $ 0.2 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $ 0.3 million for the nine months ended September 30, 2023 and 2022.

Other revenues also include lease income generated by CET’s Life Sciences Center.

It is a research facility that provides scientists with access to flexible lab space and other resources to develop biomedical products.

This lease income, as noted in Footnote 5 - Leases, was approximately $ 0.2 million and $ 0.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 0.4 million for the nine months ended September 30, 2023 and 2022 .

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

At September 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.

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.

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

The Company purchases the active pharmaceutical ingredient (“API”) for Kristalose and maintains the inventory of that raw material.

API for the Company's Vaprisol and Vibativ brands were included in the assets associated with the acquisition of those brands and are also included in the raw materials inventory.

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 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

As these APIs are consumed in the manufacture of our products, the value of the API involved is transferred from raw materials to finished goods.

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

At September 30, 2023 and December 31, 2022, total non-current inventory was $ 8.3 million and $ 7.5 million, respectively.

It included Vibativ finished goods of $ 1.3 million, Vibativ raw materials of $ 4.3 million, Kristalose raw materials of $ 1.5 million, Vaprisol raw materials of $ 0.9 million and ifetroban raw materials of $ 0.2 million.

At December 31, 2022, the Company's non-current inventory included Vibativ raw materials of $ 7.1 million and ifetroban raw materials of $ 0.3 million and finished goods of $ 0.1 million.

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

September 30, 2023 December 31, 2022

Raw materials and work in process $ 12,052,652 $ 12,899,659

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

The Lease also provides for a tenant improvement allowance for the space.

The Lease also provided for a tenant improvement allowance which we used to build out the space.

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 2028.

This laboratory and office space at CET is leased through April 2028.

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

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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 and CET leases is 10.9 years at June 30, 2023.

The weighted-average remaining lease term for the Broadwest and CET leases is 10.6 years at September 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.

Also included as a right-of-use asset is an embedded lease of $ 0.8 million related to our new manufacturer for Vaprisol.

Lease Position

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

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

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

Operating lease right-of-use assets $ 6,711,155 $ 5,218,403

Lease Liabilities June 30, 2023 December 31, 2022

Lease Liabilities September 30, 2023 December 31, 2022

Operating lease current liabilities $ 334,288 $ 172,910

1 unchanged sentence

Total $ 5,723,188 $ 4,759,211

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.

As of September 30, 2023, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 1.7 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 June 30, 2023

Maturity of Lease Liabilities at September 30, 2023

Operating Leases

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Rent expense and sublease income were as follows:

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

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

2023 2022 2023 2022

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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, 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.

During the nine months ended September 30, 2023 and September 30, 2022, the Company repurchased 302,450 shares and 290,576 shares of common stock for approximately $ 0.6 million and $ 0.8 million, respectively.

At September 30, 2023, approximately $ 3.2 million was available for the repurchase of common shares under this program.

Share purchases and sales

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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.

These purchases began in August 2023 and as of September 30, 2023, a total of 14,731 shares have been purchased through these trading plans.

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 six months ended June 30, 2023 or June 30, 2022.

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

Restricted Share Grants and Incentive Stock Options

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.

During the nine months ended September 30, 2023 and September 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 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.

During the nine months ended September 30, 2023 and 2022, the Company also issued 192,550 and 172,300 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

On December 31, 2021, the Company entered into a Fifth Amendment to the Revolving Credit Note and Sixth Amendment (the "Sixth Amendment") to Revolving Credit Loan Agreement with Pinnacle Bank (the "Pinnacle Agreement").

The Sixth Amendment increased the principal amount by $ 5 million to $ 20 million.

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 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.

On March 31, 2022, the Company and Pinnacle Bank entered into a Seventh Amendment to the Revolving Credit Loan 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 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 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 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.

For the nine months ended September 30, 2023, we recorded a credit of $ 0.05 million to stock compensation expense related to the forfeiture of unvested restricted stock awards.

New Debt Agreement

On September 5, 2023, the Company entered into a new Revolving Credit Loan Agreement with Pinnacle Bank.

This facility provides for an aggregate principal funding amount of up to $ 25 million.

The initial revolving line of credit is up to $ 20 million, with the ability for Cumberland to increase the amount to $ 25 million, under certain conditions.

It has a three year term expiring on October 1, 2026.

The interest rate is based on Benchmark (Term SOFR) plus a spread of 2.75 %.

Cumberland is subject to one financial covenant, the maintenance of a Funded Debt Ratio, determined on a quarterly basis.

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

As of September 30, 2023 and December 31, 2022, the Company had $ 12.9 million and $ 16.2 million, respectively, in borrowings outstanding under its revolving credit facility.

The applicable interest rate under the Pinnacle Agreement was 8.25 % at September 30, 2023.

Joint Venture Agreement

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(7) INCOME TAXES

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.

As of September 30, 2023, the Company has approximately $ 53.2 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 $ 2.8 million gain in the first six months of 2023 for previously paid FDA prescription drug fees.

Cumberland recorded a total of $ 3.7 million as other income in the first nine months of 2023.

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.

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

In the third quarter of 2023, the Company recorded a $ 0.5 million settlement relating to a manufacturing dispute as well as life insurance proceeds of $ 0.3 million.

(9) COLLABORATIVE AGREEMENTS

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(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.

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

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.

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.

Cumberland 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 $ 20 million at the closing of the transaction and a $ 5 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 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.

In addition, Cumberland has agreed to pay royalties of up to 20 % of on-going net sales of the product in the U.S.

after a $ 2.5 million threshold is met.

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

Cumberland prepared the valuations of the contingent consideration liability utilizing significant unobservable inputs.

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Contingent consideration earned and accrued in operating expenses 762,405

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.

Balance at September 30, 2023

The contingent consideration liability of $ 4.3 million was accounted for as $ 1.8 million of other current liabilities and $ 2.5 million of other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2023.

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

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– 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 product’s FDA registration was subsequently transferred from Kyowa Kirin to Cumberland in August 2023.

Cumberland has also accounted for this 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 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.

In March 2023, Cumberland paid $ 1.0 million of the $ 3.5 million milestone payments to Kwoya Kirin for the approval by the FDA of the manufacturing site for the product.

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

In March 2023, Cumberland made a $ 1.0 million milestone payment to Kwoya Kirin based on the FDA approval of a manufacturing site for the product.

In October 2023, Cumberland made a $ 0.5 million milestone payment based on the successful transfer of the product’s FDA registration from Kyowa Kirin to Cumberland.

The remaining $ 2 million in milestones are tied to achievement of certain annual sales levels for the product.

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

9 unchanged sentences

Contingent consideration earned and accrued in operating expenses 545,712

Balance at June 30, 2023

Balance at September 30, 2023

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

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.

The contingent consideration liability of $ 2.8 million was accounted for as $ 1.8 million of current liabilities and $ 1.1 million of other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2023.

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

2 unchanged sentences

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.

The Company then 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.

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

On November 27, 2019, Cumberland received FDA approval for the first Nordic injectable product line 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.

1 unchanged sentence

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.

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.

However, Cumberland encountered difficulties in introducing RediTrex to a new customer base and in achieving the needed managed care coverage due to market conditions during the pandemic.

On July 12, 2022, the Company entered into an amendment to the agreement with Nordic returning all rights to them including the trademark and market authorization effective June 30, 2023.

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

In accordance with the terms of the amendment, Nordic has returned the 180,000 restricted Cumberland shares previously issued to Nordic, which were cancelled, refunded to Cumberland the milestone payment of $ 1.0 million 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 associated with the launch of the product line.

The companies have cooperated on the 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