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CUMBERLAND PHARMACEUTICALS INC - Quarter Report: 2025 March (Form 10-Q)

Net changes in assets and liabilities affecting operating activities:Accounts receivable ()Inventories, net  Other current assets and other assets  Operating lease liabilities()()Accounts payable and other current liabilities()()Other long-term liabilities() Net cash provided by (used in) operating activities ()Cash flows from investing activities:Additions to property and equipment()()Net investment in manufacturing facility() Additions to intangible assets()()Net cash used in investing activities()()Cash flows from financing activities:Proceeds from ATM offering, net  Borrowings on line of credit  Payments on line of credit()()Cash settlement of contingent consideration()()Payments made in connection with repurchase of common shares()()Net cash provided by (used in) financing activities() Net increase (decrease) in cash and cash equivalents() Cash and cash equivalents at beginning of period$ $ Cash and cash equivalents at end of period$ $ 
See accompanying Notes to Condensed Consolidated Financial Statements.




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CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(Unaudited)

Common stockAccumulated deficitNoncontrolling interestsTotal equity
SharesAmount
Balance, December 31, 2023 $ $()$()$ 
Share-based compensation  — —  
Repurchase of common shares()()— — ()
Net income (loss)— — () ()
Balance, March 31, 2024 $ $()$()$ 

Common stockAccumulated deficitNoncontrolling interestsTotal equity
SharesAmount
Balance, December 31, 2024 $ $()$()$ 
Share issuances  — —  
Share-based compensation  — —  
Repurchase of common shares()()— — ()
Net income (loss)— —  () 
Balance, March 31, 2025 $ $()$()$ 
As of March 31, 2025 and 2024, restricted stock awards and options to purchase and 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.
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(3)
 $ Sancuso  Vibativ  Caldolor  Acetadote  Omeclamox-Pak()()Vaprisol() RediTrex() Other revenue  Total net revenues$ $ 
There was Omeclamox-Pak net revenue for the first quarter of 2025 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. As we have not been able to identify an alternative site to package the product, we discontinued the sales of Omeclamox-Pak and expensed the remaining brand intangible assets in late 2023. For the three months ended March 31, 2025 and 2024, the amounts noted resulted from normal distribution adjustments.
With regard to Vaprisol, we are in the process of transitioning to a new manufacturing partner, who was issued a U.S. Food and Drug Administration ("FDA") Form 483 in the second quarter of 2022. Once these FDA Form 483 related issues are satisfactorily resolved, we will then resubmit our application for their facility to the FDA for approval. For the three months ended March 31, 2025, the amounts are normal sales deduction adjustments. For the three months ended March 31, 2024, the amounts reflected our share of sales of a special, interim compounded product introduced to the market in late 2023.
Effective June 30, 2023, the Company returned all rights of RediTrex back to Nordic and will receive a long-term royalty on any sales of the product in the future. For the three months ended March 31, 2025 and 2024, the revenue amounts represented normal distribution and accrual adjustments.

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million for the three months ended March 31, 2024.
Other revenues also include lease income generated by CET’s Life Sciences Center which 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 $ million for the three months ended March 31, 2025 and 2024.
During the three months ended March 31, 2025, the Company received a $ million milestone payment associated with the approval of Vibativ for the Chinese market. We recognized as revenue all but $ of the milestone payment which is the estimated cost of virtual marketing training that will take place prior to the launch of the product in the Chinese market.

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(4)
million that were all initially classified as non-current inventories at the date of acquisition.
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.
 $ Consigned inventory  Finished goods  Total inventories  less non-current inventories()()Total inventories classified as current$ $  $ Kristalose Raw Materials  Vaprisol Raw Materials  Sancuso Raw Materials  Caldolor Raw Materials  Acetadote Raw Materials  Ifetroban Raw Materials  Vibativ Finished Goods  Caldolor Finished Goods  Omeclamox  Total inventories classified as non-current$ $ 
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(5)
rentable square feet of space (the "Leased Premise") at the Broadwest office campus located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC (the "Landlord"). The Leased Premise serves as the Company's corporate headquarters. The initial term of the Lease is one hundred fifty-seven () months, with consecutive options to renew for a period of years 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 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 provided for a tenant improvement allowance which was used to build out the space.
On October 24, 2022, CET provided the notice of exercise to extend the lease with The Gateway to Nashville, LLC (the "Gateway 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.
Also included within the right-of-use assets are start up expenditures related to new supply agreements with Nephron Pharmaceuticals Corporation ("Nephron") for our Vaprisol product and Kindos Pharmaceuticals Co., Ltd. ("Kindos") for our Vibativ product. These expenditures are classified as embedded leases resulting in right-of-use assets to be amortized over the life of the contracts. As of March 31, 2025, the right-of-use assets for Nephron and Kindos was $ million and $ million, respectively, and included in the total right-of-use assets of $ 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 the commencement date of each lease. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms.
The weighted-average remaining lease term for the Broadwest Lease and Gateway Lease is years and years at March 31, 2025 and March 31, 2024, respectively. The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments for both leases is % and % at March 31, 2025 and December 31, 2024, respectively.

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 $ 
Lease LiabilitiesMarch 31, 2025December 31, 2024
Operating lease current liabilities$ $ 
Operating lease non-current liabilities  
Total$ $ 

As of March 31, 2025, 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  Less: Interest Present value of lease liabilities$ 
Rent expense is recognized over the expected term of the lease, including renewal option periods, if applicable, on a straight-line basis as a component of general and administrative expense.
 $ Sublease income$ $ 










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(6)
million repurchase program to replace the prior authorizations. During the three months ended March 31, 2025 and March 31, 2024, the Company repurchased and shares of common stock, respectively, for approximately $ million during each period. At March 31, 2025, there remains approximately $ million available under the current repurchase program for common share repurchases.
Share purchases and sales
In the Company's November 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 Exchange Act. These purchases are designed to increase ownership in the Company by the members of the Board. The plans became effective on March 3, 2025, and as of March 31, 2025, a total of shares have been purchased through these trading plans.
Share Sales
The Company filed an updated Form S-3 with the SEC in December 2023, which was declared effective December 26, 2023 (the "Current Registration Statement"). The Company entered into an agreement with H.C. Wainwright & Co., LLC (H.C. Wainwright") to establish a new At the Market ("ATM") program under the Current Registration Statement. 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 $ million. On February 5, 2025, the Company issued shares under an ATM for an aggregate amount of $ million. As a result of this transaction, deferred offering costs of $ million related to the ATM were reclassified as a reduction of paid-in-capital. On February 14, 2025, the Company filed a prospectus supplement to amend the previous prospectus supplement to increase the maximum gross sales price from $ million to $ million. The Company intends to continue an ATM feature through H.C. Wainwright, that would allow the Company to additionally issue shares of its common stock.
Restricted Share Grants and Incentive Stock Options
During the three months ended March 31, 2025 and March 31, 2024, the Company issued shares and shares of restricted stock, respectively, to advisors and directors. Restricted stock issued to advisors generally cliff-vests on the fourth anniversary of the date of grant and for directors on the anniversary of the date of grant. During the three months ended March 31, 2025 and March 31, 2024, the Company also issued and 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 2035 and 2034, 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 three months ended March 31, 2025 and 2024, stock compensation expense was $ million. Of this amount, we recorded a credit of $ 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 (the "Loan Agreement") with Pinnacle Bank. This facility provides for an aggregate principal funding amount of up to $ 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 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 March 31, 2025 and December 31, 2024, the Company had $ million and $ million, respectively, in borrowings outstanding under its revolving credit facility. The applicable interest rate under the Loan Agreement was % at March 31, 2025.
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 million equity contribution and an initial investment from Cumberland in the form of a $ million convertible note, which was funded during the first quarter of 2021. The joint venture will seek additional future capital from additional investors and has entered into exclusive option agreements to license product candidates from both Cumberland Pharmaceuticals Inc. and Cumberland Emerging Technologies Inc.
(7)
million in federal net operating loss carryforwards including approximately $ 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 2025 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.
(8)
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(10)
 million at the closing of the transaction and a $ million milestone payment in early April 2019. In addition, Cumberland has agreed to pay royalties of up to % of on-going net sales of the product in the U.S. after a $ 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. As a result, the valuation is classified as Level 3 fair value measurement.  Cash payment of royalty during the period()Change in fair value of contingent consideration included in operating expenses Contingent consideration earned and accrued in operating expenses 
Balance at March 31, 2025
$ 
The contingent consideration liability of $ million was accounted for as $ million of other current liabilities and $ million of other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2025.

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 million at the closing of the transaction. The agreement called for milestone payments of up to $ million based on the attainment of various approvals and sales performance. In January 2023, Cumberland made a $ million milestone payment to Kwoya Kirin based on the FDA approval of a manufacturing site for the product. In October 2023, Cumberland made a $ million milestone payment based on the successful transfer of the product’s FDA registration from Kyowa Kirin to Cumberland.
The remaining $ 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 % of on-going net sales of Sancuso. 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. Cumberland has prepared a valuation of the contingent consideration liability utilizing significant unobservable inputs. As a result, the valuation is classified as Level 3 fair value measurement.
trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The plans became effective during the three months ended March 31, 2025. The material items of the trading plan are set forth in the table below:
Name of the Director or OfficerTitle of the Director or OfficerDate of AdoptionDuration of the Trading PlanMaximum Dollar Amount to be Used in the Purchase of the Securities
March 3, 2025 -
$
March 3, 2025 -
$
March 3, 2025 -
$
March 3, 2025 -
$

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Item 6. Exhibits
No.Description
10.1#

10.2#

10.3#

10.4#

10.5#

31.1*
31.2*
32.1**
101.INS*INLINE 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.SCH*INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL*INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEF*INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LAB*INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
101.PRE*INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
104COVER PAGE INTERACTIVE DATA FILE (FORMATTED AS INLINE XBRL AND CONTAINED IN EXHIBIT 101)
*Filed herewith.
**Furnished herewith.
#Indicates a management contract or compensatory plan
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SIGNATURES
Pursuant to the requirements 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.
 
Cumberland Pharmaceuticals Inc.
Date:May 9, 2025By:/s/ John Hamm
 John Hamm
Chief Financial Officer and Duly Authorized Officer

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