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CUMBERLAND PHARMACEUTICALS INC - Annual Report: 2024 (Form 10-K)

The net $0.4 million decrease in cash and cash equivalents for the year ended December 31, 2024, was attributable to cash used in operating activities offset by cash provided by financing and investing activities. Cash used in operating activities of $0.6 million is primarily due to an increase in accounts receivable of $1.9 million, a decrease in non-cash contingent consideration of $1.5 million, an increase in CSV of life insurance policies over premiums paid of $0.1 million, the gain on insurance proceeds of $0.2 million and a $1.0 million decrease in operating lease liabilities, partially offset by an increase in inventory of $2.4 million and an increase in accounts payable and other accrued liabilities.
Cash provided by investing activities less than $0.1 million was the result of more life insurance proceeds received offset by additions of intangibles and property.
Cash provided by financing activities of $0.2 million was primarily due to a $2.5 million net borrowing, partially offset by payments of $1.7 million of contingent consideration for Vibativ and Sancuso, and $0.6 million in cash used to repurchase shares of our common stock.
As noted above, we continue to repurchase shares of our common stock, as discussed in Part II, Item 5, "Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities", of this Form 10-K.
70

The net $1.4 million decrease in cash and cash equivalents for the year ended December 31, 2023, was attributable to cash provided by operating activities offset by cash used in investing and financing activities. Cash provided by operating activities of $6.1 million is primarily due to an increase in accounts payable and other accrued liabilities of $3.7 million, and a $3.4 million decrease in accounts receivable, partially offset by a decrease in non-cash contingent consideration of $1.3 million. Cash used in investing activities of $0.1 million was the result of additions of intangibles and property and equipment offset by life insurance proceeds received. Our financing activities included payments of $3.3 million of contingent consideration for Vibativ and Sancuso, a pay down on our line of credit of $3.4 and $0.7 million in cash used to repurchase shares of our common stock.
Shelf Registration
On December 14, 2023, the Company filed a Shelf Registration on Form S-3 with the SEC associated with the sale of up to $100 million in corporate securities which also was declared effective on December 26, 2023. The Company entered into a Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“H.C. Wainwright”) on March 20, 2024, in order to allow the Company to sell shares at market prices. The Company did not issue any shares under its ATM program during the year ended December 31, 2024.
On February 5, 2025, the Company utilized the Sales Agreement with H. C. Wainwright and sold 1,000,000 shares of Cumberland’s common shares. These shares sold at a volume weighted average price of $5.4688 per share for aggregate gross proceeds of $5,468,800.
On February 14, 2025, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under the Sales Agreement with H.C. Wainwright for to up to $10 million and filed a prospectus supplement under the Sales Agreement for that aggregate offering amount.
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.
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 the lessor of (a) up to $20 million or (b) the sum of the Company's cash balances and eligible accounts receivable.
Minimum Product Purchase Requirements
Our manufacturing and supply agreements do not require minimum annual purchase obligations.
71

Contractual cash obligations
The following table summarizes our contractual cash obligations as of December 31, 2024:
  Payments Due by Year
Contractual obligations(1)
Total
2025202620272028
2029 and after
Line of credit(2)
$15,276,170 $— $15,276,170 $— $— $— 
Estimated interest on debt (2)
1,904,747 1,088,427 816,320 — — — 
Vibativ contingent consideration liability payments (3)
3,242,999 381,989 474,553 512,466 481,680 1,392,311 
Sancuso contingent consideration liability payments (4)
1,516,000 332,594 336,884 325,578 204,427 316,517 
Operating leases(5)
8,268,382 836,100 909,910 934,180 740,791 4,847,401 
4.9
4.10
4.11
10.7†
10.7.1†
10.10†
Registrant's Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC on May13, 2022
10.11#
10.12#
10.13#
10.14#
10.15#
10.17#
78

10.18#
10.19#
10.20
10.23†
10.24
10.24.1
10.24.2†
10.28†
10.30#
10.31†
10.32†
10.38#
10.39#
79

10.44
10.48
10.49
10.50
10.51


16.1
19.1
21.1
23.1
31.1
31.2
32.1**
97.1
101.INSINLINE XBRL INSTANCE DOCUMENT - THE INSTANCE DOCUMENT DOES NOT APPEAR IN THE INTERACTIVE DATA FILE BECAUSE ITS XBRL TAGS ARE EMBEDDED WITHIN THE INLINE XBRL DOCUMENT.
101.SCHINLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CALINLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEFINLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LABINLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
80

101.PREINLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
#Indicates a management contract or compensatory plan.
†Confidential treatment has been granted for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the Securities and Exchange Commission.
††Confidential treatment has been requested for portions of this exhibit. These portions have been omitted from the Registration Statement and submitted separately to the Securities and Exchange Commission.
*Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the U.S. Securities and Exchange Commission upon request, provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended for any document so furnished.
**Furnished herewith.

Item 16. Form 10-K Summary
Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has elected not to include such summary information.
81

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 7, 2025.
Cumberland Pharmaceuticals, Inc.
 
/s/ A. J. Kazimi
By:A. J. Kazimi
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureTitleDate
/s/ A. J. KazimiChairman and CEOMarch 7, 2025
A. J. Kazimi(Principal Executive Officer and Director)
/s/ John M. HammVice President, Chief Financial OfficerMarch 7, 2025
John M. Hamm
(Principal Financial and
Accounting Officer
/s/ Gordon R. BernardDirectorMarch 7, 2025
Gordon R. Bernard
/s/ James R. JonesDirectorMarch 7, 2025
James R. Jones
/s/ Caroline R. YoungDirectorMarch 7, 2025
Caroline R. Young
/s/ Kenneth J. KrogulskiDirectorMarch 7, 2025
Kenneth J. Krogulski
/s/ Joseph C. GalanteDirectorMarch 7, 2025
Joseph C. Galante
/s/ Martin S. Brown, Jr.DirectorMarch 7, 2025
Martin S. Brown, Jr.

82



MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Cumberland Pharmaceuticals Inc. and its subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).
Based on its assessment, management has concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective based on those criteria.
/s/ A. J. Kazimi
A. J. Kazimi
Chief Executive Officer
March 7, 2025
/s/ John M. Hamm
John M. Hamm
Chief Financial Officer
March 7, 2025









F-1

Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee of Cumberland Pharmaceuticals Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cumberland Pharmaceuticals Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes and schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Customer Allowances for Chargebacks, Discounts and Damaged Goods, and Accruals for Rebates, Coupons, Product Returns, and Certain Fees
As described in Note 2 to the consolidated financial statements, the allowances against accounts receivable and accrued liabilities for chargebacks, discounts, service fees and expired product returns are determined on a product-by-product basis and established by management as the Company’s best estimate at the time of sale based on each product’s historical experience adjusted to reflect known changes in the factors that impact such allowances. These allowances are established based on the contractual terms with direct and indirect customers and analyses of historical levels of chargebacks, discounts and returns of expired product.
F-2

As of December 31, 2024, allowances in accounts receivable for chargebacks, cash discounts, and damaged goods were $1.1 million and the estimated liability for rebates, coupons, product returns, and certain fees were $7.8 million. These provisions are recognized concurrently with the sales of products. Provisions for chargebacks involve estimates of usage by retailers and other indirect buyers with varying contract prices for multiple wholesalers. The provision for chargebacks varies in relation to changes in sales volume, product mix, pricing, and the level of inventory at the wholesalers. Provisions are calculated using historical chargeback experience, and/or expected chargeback levels for new products and anticipated pricing changes. Provisions for rebates are recognized based on contractual obligations in place at the time of sales with consideration given to relevant factors that may affect the payment, as well as historical experience for estimated market activity. Provisions for product returns are calculated based on the expiration dates of products sold, the window where customers are permitted to return products, and the history of returns for individual products in relation to the sales volume for each product.
We identified the customer allowances for chargebacks, discounts, and damaged goods and accruals for rebates, coupons, product returns, and certain fees as a critical audit matter. The principal consideration for our determination was the significant measurement uncertainty involved in developing the reserves. Management exercises judgment in computing the amount of sales subject to the allowances and tracks the amount of allowances taken over time. All of this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions, which includes the assumption that historical activity is a good predictor of future allowance activity and modifications made to calculations based on more recent history.
The primary procedures we performed to address this critical audit matter included:
•Tested management’s process for calculating certain allowances and developed an independent expectation of the reserve balance for the remaining allowances.
•Performed a look back analysis of prior year reserves compared to actual experience in the current year.
•Tested the completeness and accuracy of underlying data used to estimate the accrual by evaluating a service organization from which data was obtained, agreeing sales data used in the calculations to reports that were reconciled to the consolidated financial statements, reconciling various allowance percentages to signed customer contracts, and tracing allowance amounts used by various customers during the year to supporting documentation.
•Evaluated the reasonableness of significant assumptions used by management in the computation of selected allowances, including comparison to historical results and considering recent changes in factors that could influence claims, such as changes in the shelf life of the products.
•Tested the clerical accuracy of individual customer allowances computed by management and agreeing the total of all estimated allowances to the respective accounts on the consolidated financial statements.
•Compared actual activity for chargebacks, discounts, and damaged goods and rebates, coupons, product returns, and certain fees reported after December 31, 2024, to estimated reserves and accruals on the December 31, 2024, consolidated balance sheet.
/s/
We have served as the Company’s auditor since 2023.
March 7, 2025

F-3

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2024 and 2023
20242023
ASSETS
Current assets:
Cash and cash equivalents$ $ 
Accounts receivable, net  
Inventories, net  
Prepaid and other current assets  
Total current assets  
Non-current inventories  
Property and equipment, net  
Intangible assets, net  
Goodwill  
Operating lease right-of-use assets  
Other assets  
Total assets$ $ 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$ $ 
Operating lease current liabilities  
Revolving line of credit - current  
Other current liabilities  
Total current liabilities  
Revolving line of credit - long term  
Operating lease non-current liabilities  
Other long-term liabilities  
Total liabilities  
See accompanying notes to consolidated financial statements











F-7

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 2024 and 2023
Cumberland Pharmaceuticals Inc. Shareholders  
 Common stockAccumulated deficitNon-controlling interestTotal equity
 SharesAmount
Balance, December 31, 2022 $ $()$()$ 
Net loss— — ()()()
Share-based compensation  — —  
Repurchase of common shares()()— — ()
Balance, December 31, 2023 $ $()$()$ 
Net loss— — () ()
Share-based compensation  — —  
Repurchase of common shares()()— — ()
Balance, December 31, 2024 $ $()$()$ 
The current portion of the contingent consideration liability is $ million and the non-current portion is $ million, as of December 31, 2024.





F-20

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
million at closing. The Company provided $ million in consideration through a grant of 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 shares of restricted Cumberland common stock previously provided to Nordic vested upon approval and were valued at $ million on the vesting date. The FDA approval also resulted in a $ million milestone payment due to Nordic. This milestone payment was paid in July 2020. During December 2020, Cumberland began distributing RediTrex which also resulted in a $ million milestone payment due to Nordic. The full launch of RediTrex occurred in October 2021.
restricted Cumberland shares we previously issued to Nordic which were cancelled; b) refunded to Cumberland the milestone payment of $ million we made associated with the brand’s U.S. approval; and c) issued a credit note in favor of the Company in the amount of $ million for the unpaid milestone payment due from us for launch of the product line all in 2023. Cumberland will receive a long-term royalty on any Nordic sales of the product.
F-21

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(4)    
 $ Sancuso  Vibativ  Caldolor  Acetadote  Omeclamox() Vaprisol() RediTrex ()Total net product revenues$ $ 
Other Revenues
The Company has agreements with international partners for commercialization of the Company’s products with associated payments included in other revenues. Those agreements provide that each of the partners is responsible for seeking regulatory approvals for the product, and following approval, each partner will be responsible for the ongoing distribution and sales in the respective international territories. The Company provides a dossier for product registration and maintains responsibility for the relevant intellectual property. Cumberland is typically entitled to receive a non-refundable, up-front payment at the time each agreement is executed as consideration for the product dossier and for the rights to the distinct intellectual property rights in the respective international territory. These agreements also typically provide for additional payments upon a partner’s achievement of a defined regulatory approval and sales milestones. The Company may also be entitled to receive royalties on future sales of the products and a transfer price on supplies. 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 $ million relating to a litigation settlement based on $ milestone payments due to us for the license associated with our Vibativ product that is included in other revenue for the year ended December 31, 2023.
Other revenues includes funding from federal grant programs including those secured from the FDA and from those secured by CET through the Small Business Administration. Grant revenue from these federal grant programs totaled approximately $ million for the years ended December 31, 2024 and 2023.
Other revenues also includes 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 15 - Leases, was approximately $ million and $ million and for the years ended December 31, 2024 and 2023, respectively.
F-22

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(5)    
 $ Consigned inventory  Finished goods, net of reserve  Total inventories  less non-current inventories()()Total inventories classified as current$ $  $ Vibativ Finished Goods  Kristalose Raw Materials  Vaprisol Raw Materials  Caldolor Finished Goods  Sancuso Raw Materials  Acetadote Raw Materials  Omeclamox  Study Drug Raw Materials  Other Products  Total non-current inventory$ $ 
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 $ million that were all initially classified as non-current inventories at the date of acquisition. Consigned inventory represents Authorized Generic inventory stored with Padagis until shipment.
At December 31, 2024 and 2023, there were cumulative obsolescence or discontinuance losses necessary to recognize.

F-23

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(6)    
 –  years$ $ Office equipment
 –  years 
  Furniture and fixtures
 –  years
  Leasehold improvements
 –  years, or remaining lease term
  
Total property and
equipment, gross
  
Less: accumulated depreciation
and amortization
()()
Total property and
equipment, net
$ $ 
Depreciation expense, including amortization expense related to leasehold improvements, is included in general and administrative expense in the consolidated statements of operations.
 $ 
(7)    
 $ Less: accumulated amortization()()Total product and license rights  Patents  Less: accumulated amortization()()Total patents  Trademarks  Less: accumulated amortization()()Total trademarks  Total intangible assets$ $ Goodwill$ $ 
Product and license rights include assets associated with the Company’s acquired products, including those discussed in Note 3, Vibativ and Sancuso.
F-24

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
million for each year in intangible assets for patents, trademarks and capitalized patent costs, including amounts incurred in the protection of the Company's intellectual property.  $ 
The expected amortization expense for the Company's current balance of intangible assets are as follows:
Year ending December 31:
2025$ 
2026 
2027 
2028 
2029 and thereafter 
$ 
(8)    
 $ Employee wages and benefits  Current portion of accrued contingent consideration  Studies accrual  Sancuso related liabilities  Accrued audit fees  Current deferred charges  Other  Total accrued liabilities$ $  $ Deferred compensation  Other  Total other long-term liabilities$ $ 

F-25

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(9)    
 million. The initial revolving line of credit is up to $ million, with the ability for Cumberland to increase the amount to $ million, under certain conditions. It has a term expiring on October 1, 2026. The interest rate is based on a benchmark (Term SOFR) plus a spread of %. 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.
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 the lessor of (a) up to $ million or (b) the sum of the Company's cash balances and eligible accounts receivable.
As of December 31, 2024 and December 31, 2023, the Company had $ million and $ million, respectively, in borrowings outstanding under its revolving credit facility. The applicable interest rate under the Pinnacle Agreement was % and % at December 31, 2024 and December 31, 2023, respectively.
(10)    
, the Company completed its initial public offering of shares of common stock at a price of $ per share, raising gross proceeds of $ million. After deducting underwriting discounts of approximately $ million and offering costs incurred of approximately $ million, the net proceeds to the Company were approximately $ million.
(b)    Preferred Stock
The Company is authorized to issue  shares of preferred stock. The Board of Directors is authorized to divide these shares into classes or series, and to fix and determine the relative rights, preferences, qualifications and limitations of the shares of any class or series so established. At December 31, 2024 and 2023, there was preferred stock outstanding.
(c)    Common Stock
During 2024 and 2023, the Company issued shares and shares of common stock, respectively, as a result of restricted shares vesting as well as other common share issuances. There were no option exercise transactions during 2024 and 2023.
(d)    Share Repurchases
The Company currently has a share repurchase program available to repurchase up to $ million of its common stock pursuant to Rule 10b-18 of the Securities Exchange Act of 1934. The Company repurchased shares and shares of common stock for approximately $ million and $ million during the years ended December 31, 2024 and 2023, respectively. There remains approximately $ million available under the current repurchase program available for share repurchases at December 31, 2024.
F-26

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(11)    
)$()Net (income) loss at subsidiary attributable to noncontrolling interests() Net loss attributable to common shareholders$()$()Denominator:Weighted-average shares outstanding – basic  Weighted-average shares outstanding – diluted    

F-27

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(12)    
 $ Property and equipment and intangibles  Right-of-use liability  Intangible assets  Section 174 expenses  Allowance for accounts receivable  Reserve for expired product  Inventory  Business interest expense limitation  Deferred charges  Cumulative compensation costs incurred on deductible equity awards  Total deferred tax assets  Deferred Tax LiabilitiesRight-of-use asset()()Net deferred tax assets, before valuation allowance  Less: deferred tax asset valuation allowance()()Net deferred taxes$ $  $ 2026-2042  Indefinite Period  Total federal and state net operating loss carryforwards$ $ 

F-28

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
 $ State and other() Total current income tax expense() Deferred:Federal  State  Total deferred income tax expense  Total income tax expense (benefit)$()$  % %State Taxes Net of Federal Benefit ()Tax Credits Generated  Change in valuation allowance()()Permanent differences()()Expiring tax credits()()Deferred True-ups ()Net loss tax benefit (expense) %()%
The Company believes that it is not more likely than not that its net deferred tax assets will be realized. As such, the net deferred tax assets are fully offset with a valuation allowance as of the periods ended December 31, 2024 and 2023.
As of December 31, 2024, the Company has general business credit carryforwards of $ million. These credit carryforwards will expire in years 2025 through 2044.
 2026-2044 Total federal and state credit carryforwards$ 
F-29

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(13)    
equity compensation plans. The 2007 Long-Term Incentive Compensation Plan (the "2007 Plan") and the 2007 Directors’ Incentive Plan (the "Directors’ Plan"), which were approved by shareholders, superseded the 1999 Stock Option Plan. Both plans are available for future grants of equity compensation awards to employees, consultants and directors. The 2007 Plan and the Directors’ Plan provide for the issuance of stock options, stock appreciation rights and restricted stock. Vesting is determined on a grant-by-grant basis in accordance with the terms of the plans and the related grant agreements. The Company has reserved million shares of common stock for issuance under the 2007 Plan and shares for issuance under the Directors’ Plan. As of December 31, 2024, the Company had shares available for future grants under the 2007 Plan and shares available under the Directors’ Plan.
The exercise price of stock options is generally % of the fair market value of the underlying common stock on the grant date, except for incentive stock options granted to % shareholders, which the exercise price is no less than % of the fair market value. The maximum contractual term of stock options is from the grant date, except for incentive stock options granted to % shareholders, which is no more than .
During 2011, the Company began issuing shares of restricted stock with no exercise price to employees and directors. Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the grant date. Beginning in 2021, the Company began issuing incentive stock options to employees with the same fourth anniversary cliff-vest. Restricted stock continues to be issued to directors and vests on the anniversary of the grant date. Restricted stock issued to advisors generally cliff-vests on the fourth anniversary of the grant date.
Stock compensation expense is presented as a component of general and administrative expense in the consolidated statements of operations. Stock compensation expense was $ million and $ million for the years ended December 31, 2024 and 2023, respectively.
At December 31, 2024, there was approximately $ million of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of years.
Stock Options
 $ Granted  Exercised  Forfeited/canceled() 
Outstanding, December 31, 2023
  Granted  Exercised  Forfeited/canceled() 
Outstanding, December 31, 2024
 $ 
The weighted-average grant-date fair value of options granted during the years 2024 and 2023 was $ and $ , respectively. options were vested and exercisable at December 31, 2024. The aggregate intrinsic value of options outstanding was minimal.



F-30

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
Expected volatility % %Risk free interest rate % %Expected dividend yield  
•Expected Term - The Company has estimated the expected life of its stock options using the simplified method, whereby the expected life equals the average of the vesting term and the original contractual term of the option.
•Expected volatility - Based on the Company’s historical stock price volatility.
•Risk Free rate - The Company bases the risk-free interest rate assumption for equity awards on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.
•Expected dividend yield - The Company’s expected dividend yield assumption is as it has never paid dividends and has no present intention to do so in the future.
Restricted Stock Awards
  Granted  Vested/released() Forfeited/canceled() 
Nonvested, December 31, 2023
  Granted  Vested/released() Forfeited/canceled() 
Nonvested, December 31, 2024
  
The fair value of restricted stock granted was based on the closing market price of the Company’s common stock on the grant date. The fair value of restricted stock awards that vested during the years 2024 and 2023 was $ million for each year. At December 31, 2024, there was approximately $ million of unrecognized compensation costs related to restricted stock awards, which is expected to be recognized over a weighted-average period of less than a year. The restricted stock grants are included in the diluted weighted shares outstanding computation until they cliff-vest. Once vested they are included in the basic weighted shares outstanding computation.

F-31

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(14)    
, having been employed by the Company for at least . The Plan provides that participants may contribute up to the maximum amount of their compensation as set forth by the Internal Revenue Service each year. Employee contributions are invested in various investment funds based upon elections made by the employees. During 2024 and 2023, the Company contributed approximately $ million in each year to the Plan as an employer match of participant contributions.
In 2012 and 2013, the Company established non-qualified unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation. The liability under the plans, reflected in other long term liabilities in the consolidated balance sheets, was $ million and $ million as of December 31, 2024 and 2023, respectively. The Company had assets consisting of company-owned life insurance contracts generally designated to pay benefits of the deferred compensation plans reflected in other assets in the consolidated balance sheet of $ million and $ million as of December 31, 2024 and 2023, respectively.
(15)    
rentable square feet of space at the new development Broadwest located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC. The leased premise serves as the Company's new corporate headquarters. The initial term of the lease is one hundred fifty-seven () months, with consecutive options to renew for a period of each, with the commencement date of October 25, 2022. This lease currently expires in November 2035.
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 $ per square foot of rentable space with a gradual rental rate increase of % for each year period 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. The lease also provides for a tenant improvement allowance for the space.
On October 24, 2022, the CET lease with The Gateway to Nashville, LLC provided the notice of exercise to extend the lease for . The lease is for approximately 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.
Included within the right-of-use assets are startup expenditures related to a new supply agreement with Nephron Pharmaceuticals Corporation (“Nephron”). 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 December 31, 2024 and 2023, the value of this asset was $ million and $ million, respectively.
Also included within the right-of-use assets are startup expenditures related to a new master services agreement and project agreement with Kindos Pharmaceuticals Co. Ltd. signed in 2024. These expenditures are also classified as an embedded lease resulting in a right-of-use asset to be amortized over the life of the Kindos contract. As of December 31, 2024, the value of the asset was $ million.
 $ Sublease income$ $ 
F-32

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
years and years for the year ended December 31, 2024 and 2023, respectively. The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments of both leases is % and % for the years ended December 31, 2024 and 2023, respectively.
Lease Position
 $ 
Lease LiabilitiesDecember 31, 2024December 31, 2023
Operating lease current liabilities$ $ 
Operating lease non-current liabilities  
Total$ $ 

As of December 31, 2024, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $ million which includes the 90-day notice required for lease termination.
 2026 2027 2028 2029 After 2029 Total minimum lease payments Less: Interest()Present value of lease liabilities$ 

F-33

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(16)    
%%Customer 2%%Customer 3%%
The Company’s accounts receivable, net of allowances, due from the customers representing 10% or more of consolidated revenue was % and % at December 31, 2024 and 2023, respectively.
(17)    
or primary suppliers to manufacture each of its products and product candidates. Although there are a limited number of manufacturers of pharmaceutical products, the Company believes it could utilize other suppliers to manufacture its prescription products on comparable terms. A change in suppliers, problems with its third-party manufacturing operations or related production capacity, or contract disputes with suppliers could cause a delay in manufacturing or shipment of finished goods and possible loss of sales, which could adversely affect operating results.
(18)    
(19)    
 million in milestones and tiered royalties ranging from % to % on U.S. net product sales for .




F-34

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
payment to the Company within 30 days following the first filing of an sNDA in relation to the Product (as defined by the Agreement) and a $ payment to the Company following the approval of the first sNDA in relation to the Product.
After Defendants disclosed the domiciles of its limited partners to the Company, as required by the Court, on October 24, 2022, the action for breach of contract was refiled in the Supreme Court of the State of New York, County of New York (Index No. 654234/2022) on November 7, 2022.
The complaint alleges that, despite the Defendants filing an NDA and sNDA for the Product and receiving FDA approval for both applications, the Defendants failed to make the required total of $ million in milestone payments to the Company. The Company was seeking damages in the amount of no less than $ million, pre- and post-judgment interest under N.Y. C.P.L.R. § 5001, costs, and such further relief as the court deems just and proper.
On April 18, 2023 the state court ruled in favor of the Company. On June 16, 2023, the Company received consideration related to the breach of contract action with the Defendants that finalized a settlement agreement that was entered into by the Company and the Defendants to close the case.

F-35

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)
(20)    
 $ $ $ $ Operating loss()()()()()Net loss()()()()()Net loss attributable to common shareholders()()()()()
Loss per share attributable to common shareholders (1)
Basic$()$()$()$()$()Diluted$()$()$()$()$()2023:Net revenues$ $ $ $ $ Operating income (loss)() ()()()Net income (loss)  ()()()Net income (loss) attributable to common shareholders  ()()()
Earnings (loss) per share attributable to common shareholders (1)
Continuing operations - basic$ $ $()$()$()Continuing operations - diluted$ $ $()$()$()
(1)    Due to the nature of interim earnings per share calculations, the sum of the quarterly earnings (loss) per share amounts may not equal the reported earnings (loss) per share for the full year.
F-36

   ()
(1)
 2024   () Valuation allowance for deferred tax assets:
For the years ended
December 31:
2023     2024   
(1) Composed of actual returns and credits for chargebacks and cash discounts.




F-37

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