What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2023-11-13 · 114 added, 137 removed, 330 unchanged (43% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

24 unchanged sentences

100,000,000 shares authorized;

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

14,159,954 and 14,121,833 shares issued and outstanding as of March 31, 2024 and December 31, 2023 , respectively

46,923,757 47,091,602

4 unchanged sentences

Total liabilities and equity $ 81,509,518 $ 81,776,075

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

CUMBERLAND PHARMACEUTICALS INC.

1 unchanged sentence

Condensed Consolidated Statements of Operations

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

2023 2022 2023 2022

Three months ended March 31,

Net revenues $ 8,497,701 $ 9,224,638

9 unchanged sentences

Other income — 1,847,065

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

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

Interest expense ( 118,526 ) ( 186,353 )

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

Income (loss) before income taxes ( 1,891,030 ) 179,224

Income tax expense ( 11,442 ) ( 6,938 )

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

Net income (loss) ( 1,902,472 ) 172,286

Net (income) loss at subsidiary attributable to noncontrolling interests ( 43,791 ) 19,898

Net income (loss) attributable to common shareholders $ ( 1,946,263 ) $ 192,184

5 unchanged sentences

- diluted 14,098,022 14,587,843

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

CUMBERLAND PHARMACEUTICALS INC.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

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

Net income (loss) $ ( 1,902,472 ) $ 172,286

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

Depreciation and amortization expense 1,150,685 1,255,675

Amortization of operating lease right-of-use assets 285,184 172,209

Share-based compensation 78,754 90,156

Decrease in non-cash contingent consideration ( 230,430 ) ( 267,637 )

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

Increase in cash surrender value of life insurance policies over premiums paid ( 129,217 ) ( 30,799 )

Increase in noncash interest expense 3,810 4,296

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

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

Net changes in assets and liabilities affecting operating activities:

2 unchanged sentences

Other current assets and other assets 205,619 383,612

Operating lease liabilities ( 213,825 ) 127,137

Accounts payable and other current liabilities ( 645,542 ) ( 1,105,263 )

Other long-term liabilities 156,728 ( 530,872 )

Net cash provided by operating activities 5,053,700 4,815,365

Net cash used in operating activities ( 2,136,647 ) ( 1,418,209 )

Cash flows from investing activities:

Additions to property and equipment ( 41,621 ) ( 107,260 )

Settlement of patent litigation — 21,757

Life insurance policy proceeds received — 877,597

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

Additions to intangible assets ( 16,565 ) ( 67,193 )

2 unchanged sentences

Borrowings on line of credit 11,000,000 8,000,000

Repayments on line of credit ( 27,051,875 ) ( 44,000,000 )

Cash payment of contingent consideration ( 2,108,933 ) ( 1,117,576 )

Repurchase of common shares ( 551,563 ) ( 863,383 )

Payments on line of credit ( 7,700,000 ) ( 8,127,714 )

Cash settlement of contingent consideration ( 630,701 ) ( 1,464,311 )

Payments made in connection with repurchase of common shares ( 247,605 ) ( 187,117 )

Net cash provided by (used in) financing activities 2,421,694 ( 1,779,142 )

Net decrease in cash and cash equivalents ( 1,250,005 ) ( 7,499,278 )

Net increase (decrease) in cash and cash equivalents 226,861 ( 3,371,804 )

Cash and cash equivalents at beginning of period $ 18,321,624 $ 19,757,970

Cash and cash equivalents at end of period $ 18,548,485 $ 16,386,166

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

CUMBERLAND PHARMACEUTICALS INC.

6 unchanged sentences

Repurchase of common shares ( 86,829 ) ( 187,961 ) — — ( 187,961 )

Net loss — — ( 1,385,253 ) ( 17,180 ) ( 1,402,433 )

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

Net income (loss) — — 192,184 ( 19,898 ) 172,286

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

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

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

5 unchanged sentences

Balance, March 31, 2024 14,159,954 $ 46,923,757 $ ( 19,434,424 ) $ ( 299,781 ) $ 27,189,552

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

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.

See accompanying Notes to Condensed Consolidated Financial Statements.

CUMBERLAND PHARMACEUTICALS INC.

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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, 2023 (the “2023 Annual Report on Form 10-K”).

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.

The results of operations for the three months ended March 31, 2024, 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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Please refer to Trade and Notes Receivables Policy below.

Recently Issued Accounting Standards Not Yet Adopted

In November 2023, the FASB issued final guidance intended to improve transparency of segment disclosures, primarily through expanded disclosures for significant segment expenses.

The guidance is effective for annual periods beginning in 2024 and interim periods beginning in 2025.

Early adoption is permitted.

This new guidance will result in incremental disclosures in the notes to the Company’s segment reporting disclosures.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025.

We are currently evaluating the potential impact of adopting this standard on our disclosures.

In December 2023, the FASB issued final guidance to improve transparency of income tax disclosures.

The final guidance requires enhanced disclosures primarily related to existing rate reconciliation and income taxes paid information.

The guidance is effective for 2025 annual reporting.

Early adoption is permitted.

This new guidance will result in incremental disclosures in the notes to the Company’s income tax disclosures.

We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2024.

We are currently evaluating the potential impact of adopting this standard on our disclosures.

Accounting Policies

12 unchanged sentences

Trade and Note Receivables Policy

Management performed a scoping exercise to ensure completeness over the application of Current Expected Credit Losses (CECL) across the various financial instruments including trade and note receivables.

CECL is applicable to all financial assets measured at amortized cost.

The authoritative guidance requires that all financial instruments should be evaluated, including cash equivalents such as 3-month T-Bills, even if the expected loss is determined to be zero, or materially zero.

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

Management evaluates the application of Current Expected Credit Losses (CECL) to all of its financial instruments including trade and note receivables.

CECL is applicable to all financial instruments measured at amortized cost.

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

9 unchanged sentences

The standard requires entities to pool financial assets but allows them to choose which risk characteristics to use.

Under the requirements of the guidance, the Company would need to reassess at the end of each reporting period whether the pool of assets continue to display similar risk characteristics.

Under the requirements of the guidance, the Company reassesses at the end of each reporting period whether the pool of assets continues to display similar risk characteristics.

With twenty years of experience, Cumberland has experienced virtually no write downs of receivables as most of our receivables are due from large successful pharmaceutical, healthcare or government customers, consistently making payments on account.

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(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 nine months ended September 30, 2023 and 2022:

Three months ended September 30,

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, 2024 and 2023:

Three months ended March 31,

Net loss attributable to common shareholders $ ( 1,946,263 ) $ 192,184

2 unchanged sentences

Weighted-average shares outstanding – diluted 14,098,022 14,587,843

Nine months ended September 30,

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

Weighted-average shares outstanding – basic 14,343,560 14,618,975

Dilutive effect of other securities 178,040 —

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

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.

As of March 31, 2024 and 2023, restricted stock awards and options to purchase 496,859 and 331,338 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 nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

The Company’s net revenues consisted of the following for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

Kristalose $ 3,195,609 $ 4,315,128

8 unchanged sentences

Total net revenues $ 8,497,701 $ 9,224,638

The Omeclamox-Pak net revenue for the third quarter of 2023 was impacted by our lack of commercial inventory of this product.

There was no Omeclamox-Pak net revenue for the first quarter of 2024 due to 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 nine months ended September 30, 2023 and 2022, the amounts noted resulted from normal adjustments by channel partners.

As we have not been able to identify an alternative site to package the product, we decided to discontinue the sales of Omeclamox-Pak and expense the remaining brand intangible assets in late 2023.

For the three months ended March 31, 2024 and 2023, 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.

1 unchanged sentence

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 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.

Meanwhile, we have been working with them to support a special, interim supply of compounded product for critically ill patients, which they introduced to the market in late 2023.

For the three months ended March 31, 2024, the amounts reflected our share of sales of the compounded product.

For the three months ended March 31, 2023, net revenue was impacted by product return and accrual adjustments.

Based on an amendment to the agreement between the Company and Nordic Group B.V.

("Nordic"), effective June 30, 2023, the Company returned all rights of RediTrex back to Nordic and the Company will receive a long-term royalty on any Nordic sales of the product in the future.

For the three months ended March 31, 2024 and 2023, the revenue amounts represented normal adjustments by channel partners and accrual adjustments.

Other Revenues

6 unchanged sentences

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.

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 $ 0.1 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.

Grant revenue from these federal grant programs totaled approximately $ 0.1 million for the three months ended March 31, 2024 and 2023.

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 .

This lease income, as noted in Footnote 5 - Leases, was approximately $ 0.2 million and $ 0.1 million for the three months ended March 31, 2024 and 2023, 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, 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.

At March 31, 2024 and December 31, 2023, there were no cumulative obsolescence and discontinuance losses necessary.

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

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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

At March 31, 2024 and December 31, 2023, the Company's net inventories consisted of the following:

March 31, 2024 December 31, 2023

Raw materials and work in process $ 12,772,140 $ 12,619,092

4 unchanged sentences

Total inventories classified as current $ 4,327,526 $ 4,609,362

At March 31, 2024 and December 31, 2023, the Company's non-current inventories consisted of the following:

March 31, 2024 December 31, 2023

Vibativ Raw Materials $ 6,611,426 $ 6,611,426

Kristalose Raw Materials 3,213,387 3,263,516

Vaprisol Conivaptan Raw Materials 1,173,442 1,170,641

Sancuso Raw Materials 578,804 574,502

Caldolor Raw Materials 31,489 —

Acetadote Raw Materials 25,048 33,678

Study Drug Ifetroban Raw Materials 203,383 203,383

Vibativ Finished Goods 955,969 810,454

Caldolor Finished Goods 53,326 67,307

Omeclamox 69,622 69,622

Total inventories classified as non-current $ 12,915,896 12915896 $ 12,804,529

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").

6 unchanged sentences

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.

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

On October 24, 2022, the CET lease with The Gateway to Nashville, LLC provided the notice of exercise to extend the lease for five years .

The lease is for approximately 14,200 square feet of wet laboratory and office space in Nashville, Tennessee where CET operates the CET Life Sciences Center.

The wet laboratory and office space is leased through April 2028.

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

Also included within the right-of-use assets are start up expenditures related to a new supply agreement with Nephron Pharmaceuticals Corporation (“Nephron”) for our Vaprisol product.

These expenditures are classified as an embedded lease resulting in a right-of-use asset to be amortized over the life of the Nephron contract.

As of March 31, 2024, the value of this lease was $ 0.9 million.

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 October 25, 2022 and May 1, 2023.

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 10.6 years at September 30, 2023.

The weighted-average remaining lease term for the Broadwest and Gateway leases is 10.2 years and 12.6 years at March 31, 2024 and March 31, 2023, respectively.

The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments is 9.40 % for the Broadwest lease and 9.24 % for the remaining CET lease.

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 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

At March 31, 2024 and December 31, 2023, the Company's lease assets and liabilities were as follows:

Right-of-Use Assets March 31, 2024 December 31, 2023

Operating lease right-of-use assets $ 6,521,088 $ 6,674,394

Lease Liabilities September 30, 2023 December 31, 2022

Lease Liabilities March 31, 2024 December 31, 2023

Operating lease current liabilities $ 362,244 $ 348,092

Operating lease noncurrent liabilities 5,388,900 4,586,301

Operating lease non-current liabilities 5,200,148 5,296,247

Total $ 5,562,392 $ 5,644,339

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.

As of March 31, 2024, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ 0.2 million which includes the 90-day notice required for lease termination.

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, 2023

Maturity of Lease Liabilities at March 31, 2024

Operating Leases

After 2028 4,847,401

Total lease payments 9,344,359

Interest 3,355,485

2 unchanged sentences

Rent expense and sublease income were as follows:

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

2023 2022 2023 2022

Three months ended March 31,

Rent expense $ 355,064 $ 234,863

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, 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.

During the three months ended March 31, 2024 and March 31, 2023, the Company repurchased 125,870 shares and 86,829 shares of common stock for approximately $ 0.2 million, respectively.

At March 31, 2024, there remains approximately $ 2.8 million available under the current repurchase program for common share repurchases.

Share purchases and sales

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.

In the Company's March 2024 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.

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.

As of March 31, 2024, there were no shares purchased through these trading plans as the purchases will begin in June 2024.

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.

3 unchanged sentences

to support such a placement of shares.

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

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, 2023 or September 30, 2022.

The Company filed an updated Form S-3 with the SEC in December 2023, which was declared effective December 26, 2023.

On March 20, 2024, 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 $ 5.8 million.

The Company intends to continue an ATM feature through H.C.

Wainwright & Co., LLC, 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, 2024.

Restricted Share Grants and Incentive Stock Options

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.

During the three months ended March 31, 2024 and March 31, 2023, the Company issued 50,500 shares and 28,250 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 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.

During the three months ended March 31, 2024 and 2023, the Company also issued 187,600 and 183,250 incentive stock options, respectively, to employees that cliff-vest on the fourth anniversary of the date of grant, and are largely set to expire in 2034 and 2033, 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 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.

For the three months ended March 31, 2024, we recorded a credit of $ 0.01 million to stock compensation expense related to the forfeiture of unvested restricted stock awards and incentive stock options.

Debt Agreement

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

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

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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.

On May 6, 2024, the Company entered into a First Amendment to the Loan Agreement which provides an alternative to the financial covenant by delivering to the lender a borrowing base certificate and complying with certain borrowing base requirements which set forth a maximum revolver amount equal to (a) up to $ 20 million or (b) the sum of the Company's cash balances and eligible accounts receivable.

As of March 31, 2024 and December 31, 2023, the Company had $ 16.1 million and $ 12.8 million, respectively, in borrowings outstanding under its revolving credit facility.

The applicable interest rate under the Pinnacle Agreement was 8.125 % at March 31, 2024.

Joint Venture Agreement

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(7) INCOME TAXES

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.

As of March 31, 2024, the Company has approximately $ 52.1 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.

The Company expects it will continue to pay minimal income taxes during 2024 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.

(8) OTHER INCOME

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.

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.

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.

(8) COLLABORATIVE AGREEMENTS

1 unchanged sentence

The funding for these programs is primarily provided through Federal Small Business Administration (SBIR/STTR) and other grant awards.

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

The Company has determined that these collaborative agreements, with the exception of the collaborative payment discussed in Note 10, related to Vibativ and Sancuso contingent consideration payments, do not meet the criteria for accounting under ASC Topic 808, Collaborative Agreements .

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

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Contingent consideration earned and accrued in operating expenses —

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.

Balance at March 31, 2024

The contingent consideration liability of $ 3.7 million was accounted for as $ 1.2 million of other current liabilities and $ 2.5 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2024.

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

13 unchanged sentences

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

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 January 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.

12 unchanged sentences

Contingent consideration earned and accrued in operating expenses 182,777

Balance at September 30, 2023

Balance at March 31, 2024

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

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.

("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 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., 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.

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.

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 contingent consideration liability of $ 2.0 million was accounted for as $ 1.2 million of current liabilities and $ 0.8 million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2024.

On July 12, 2022, the Cumberland entered into an amendment to the agreement with Nordic Group B.V.("Nordic") returning all the U.S.

rights to RediTrex back to Nordic including the trademark and market authorization effective June 30, 2023.

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