Cumberland Pharmaceuticals Inc. Annual Report 2021

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FY2021 Annual Report · Cumberland Pharmaceuticals Inc.

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Building our product portfolio
to advance patient care

2 0 2 1 A N N U A L R E P O R T

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Cumberland
Pharmaceuticals

is dedicated to improving the quality of patient
care through the delivery of high-quality
prescription medicines. With a focus on
underserved niche markets, we continue to
expand our reach – growing existing brands,
adding innovative products, and forging
partnerships both domestically and around the
globe. With a commitment to excellence, we are
working to address poorly met medical needs
as we develop new medicines for the future.

Three new
products in our
pipeline to
address unmet

products that
deliver real
patient solutions
every day

medical needs3
8 Eight quality
5 CET partners
10 Worldwide

partnerships
that deliver
our brands to
10 countries

with five southern
universities

To Our Shareholders,
Employees &
Partners:

Progress through perseverance…

I will start by sharing an exciting and significant
development!

In December of 2021, we signed an agreement
with Japan-based Kyowa Kirin, for the acquisition
of the U.S. assets and rights associated with their
oncology-support brand, Sancuso®.

It is the first and only FDA-approved prescription
patch for the prevention of nausea and vomiting
in cancer patients receiving certain types of
chemotherapy. Sancuso will be supported by our
new sales division - Cumberland Oncology.

intravenously delivered

During the fourth quarter of 2021, we received
FDA approval for expanded labeling of our
Caldolor® product, a non-narcotic pain reliever.
This
formulation of
ibuprofen is now approved for use prior to surgery.
Patients wake-up in less pain and with less need
for opioids, as we help address our country’s
opioid epidemic.

In 2021 we also implemented the national launch
of RediTrex®, our FDA-approved line of injectable
methotrexate products designed for arthritis
patients. These state-of-the-art, pre-filled
syringes feature an innovative delivery system for
easy handling and dosing accuracy.

Meanwhile, we were pleased to share a number
of new publications
featuring our brands
during 2021. We issued a series of case studies
describing the effectiveness of Vibativ® which has
been used across the country to treat pneumonia
in COVID-19 patients.

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During the past two years, we have faced the most
challenging operating environment in the history of
our company. Throughout the pandemic, we have
worked hard to maintain operations – while also
ensuring the health and safety of our organization.

We have adjusted our commercial activities by
reinventing the way we operate – in order to
support our customers and the patients who
can benefit from our medicines. Fortunately, our
diversified product portfolio of FDA-approved
brands has helped us mitigate the negative effects
of the pandemic on our business, resulting in a
steady overall performance.

During the year, we also maintained compliance
with the many requirements that apply to us
as a publicly traded pharmaceutical company.
Additionally, we worked closely with the FDA-
approved manufacturers that supply our products,
closely monitoring our supply chain – including
the raw materials as well as the finished goods
emerging from the facilities.

I am excited to share that during the fourth quarter
we announced a new agreement to relocate our
corporate headquarters. Later this year, we will
move to the new Broadwest campus, which is also
located in Nashville’s West End, Vanderbilt corridor.
This new location keeps us close to the internationally
recognized Vanderbilt Medical Center, with whom
we regularly collaborate. It will also provide us with
a long-term home with increased efficiency and
convenience for our overall operations.

Meanwhile, we are sponsoring three Phase II
clinical programs featuring our ifetroban product
candidates. We look forward to sharing results once
each of these studies is completed, at which point
we will decide on the best development path for the
registration of ifetroban - which has the potential to
help many patients and create considerable value.

However, our team remained focused on our mission
of advancing patient care through the delivery of high-
quality medicines. I would like to extend my sincerest
thanks to my colleagues here at Cumberland, for
their valuable contributions over the last year.

Looking ahead, we will continue to build a
diversified portfolio of innovative products through
both internal development of new candidates
and the acquisition of established brands. We
will also continue to look for strategic partners
that complement our capabilities and enhance
opportunities for our brands.

Lastly, I would like to highlight Cumberland’s
ongoing commitment to sustainability. In mid- 2021,
we shared our latest Sustainability Report, detailing
activities pertaining to our environmental, social
and governance matters. As noted in the report,
we provided nearly 2.5 million patient doses of our
products. We also actively supported our team and
engaged with our community through philanthropy.

We look forward to returning to a more normal
operating environment as we move through 2022.

All the best,

Like other companies that rely on hospital admissions
and patient visits to drive revenue, Cumberland faced
its challenges in 2021 as the pandemic continued.

AJ Kazimi
Chairman and Chief Executive Officer

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Building our portfolio of unique
pharmaceutical brands

Our product portfolio continues to expand and
now includes eight FDA-approved brands. We are
working in several attractive medical specialties
that include hospital-based acute care, along
with physician office-based gastroenterology,
rheumatology, and oncology.

In 2021 we increased our offerings with the
acquisition of Sancuso® from Japan-based Kyowa
Kirin Co. Sancuso is a unique, FDA-approved
prescription patch for the prevention of nausea
and vomiting in patients receiving certain types of
chemotherapy for their cancers.

Patients receive our product prior to their
chemotherapy, through a thin layer of adhesive
that adheres to their skin and releases the active
drug into their bloodstream over several days.

Unlike alternative oral treatments, which must
be taken multiple times daily to deliver the same
therapeutic doses, Sancuso does not require
swallowing pills - which can be difficult for patients
experiencing nausea.

(acetylcysteine) Injection,
for the treatment of
acetaminophen poisoning

(ibuprofen) Injection, for the
treatment of pain and fever

(lactulose) for Oral Solution, a
prescription laxative, for the treatment
of chronic and acute constipation

(omeprazole, clarithromycin,
amoxicillin) for the treatment of
Helicobacter pylori (H. pylori) infection
and related duodenal ulcer disease

(conivaptan) Injection, to raise
serum sodium levels in hospitalized
patients with euvolemic and
hypervolemic hyponatremia

(methotrexate) Injection, for the
treatment of active rheumatoid,
juvenile idiopathic and severe
psoriatic arthritis, as well as
disabling psoriasis

(telavancin) Injection, for the
treatment of certain serious
bacterial infections including
hospital-acquired and ventilator-
associated bacterial pneumonia,
as well as complicated skin and
skin structure infections

Sancuso is the first and only
prescription patch approved
for the prevention of CINV and
provides an alternative to taking
pills to prevent nausea and
vomiting caused by chemotherapy

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More than half a million
Americans undergo
chemotherapy each year,
with many suffering from
the side effects associated
with those treatments.
Our newly added Sancuso
brand can help ensure that
oncology patients tolerate and
continue the needed therapy
for their cancers.

Jim Herman
Executive Vice President,
National Accounts and
Chief Compliance Officer

For more information on our commercial products,
visit www.cumberlandpharma.com.

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Our pipeline includes
potential “orphan drug”
candidates that are
designed to serve
patients with rare
diseases, whose needs
are not met by current
treatments. We believe
that these medications
hold the promise of
life-changing impact.

Ines Macias-Perez
Senior Manager,
Clinical Development

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Developing new medicines
for the future

To advance the delivery of healthcare, we have
established a robust pipeline of new medicines
designed to address unmet medical needs.
Throughout 2021, we continued the clinical
development on several promising candidates
for which we are working to win approval.

Each of these product candidates can provide
solutions for these patients and in turn create
significant value for our Company.

We are conducting Phase II trials for:

• Boxaban®, for treating a severe form of

asthma known as:
Aspirin-exacerbated-respiratory-disease.

• Vasculan® for patients suffering from an

autoimmune disorder known as:
Systemic sclerosis.

• Dyscorban®, for treating cardiomyopathy

associated with:
Duchenne muscular dystrophy.

Our pipeline of product candidates includes:

Preclinical

IND

Phase 1

Phase 2

Phase 3

NDA

(aspirin-exacerbated respiratory disease) Boxaban®

(systemic sclerosis) Vasculan®

(Duchenne muscular dystrophy) Dyscorban®

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2021 Highlights

As a company, we work to deliver high quality
medicines that improve the care for patients.

• We added a new brand to our suite of FDA

approved products.

During 2021, we executed on our strategies for
advancing that mission.

• We obtained expanded labeling for a key product.

• We strengthened our collaborations.

• We maintained a robust development pipeline.

We expanded our offerings of
FDA-approved products with the
acquisition of the oncology, supportive-
care medicine Sancuso®, a prescription
patch designed to address the side
effects of chemotherapy in patients.

partner - SciClone
Pharmaceuticals in their
submission of Vibativ®,
our potent antibiotic, for
approval in China.

6We supported our
5

We received FDA approval for the
pre-operative administration
of Caldolor®, our intravenously
delivered formulation of Ibuprofen,
which enables patients to wake
up from their procedures in
significantly less pain and reduce
their need for opioids.

We renewed our Line
of Credit with Pinnacle
Bank for an extended,
three-year term and
expanded the facility to
$20 million to fund the
Sancuso® acquisition.

1 2
34

We reached an agreement
to relocate our corporate
offices to the Broadwest
campus in the West End/
Vanderbilt corridor in
Nashville. The move is
planned for late 2022.

We launched our
RediTrex® line of novel
pre-filled syringes
designed for the simple,
safe, and effective
treatment of arthritis.

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While we have faced many
challenges during the pandemic, we
have adapted and fortunately our
diversified portfolio has enabled us
to maintain a steady performance
during the last two years.

Todd M. Anthony
Vice President,
Organizational Development

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CET represents an
innovative partnership
between academic research
institutions, the private
sector and government
to advance promising
new biopharmaceutical
technologies in ways that
serve both public and
business interests.

Joe Rolwing
Senior Director,

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Cumberland Emerging Technologies (CET)

To continue the innovation needed to improve
health care, we formed Cumberland Emerging
Technologies (CET). Through collaboration with
a select group of academic research institutions,
CET works to identify promising research
discoveries that can
lead to commercial
pathways for new biopharmaceutical products.

CET represents a unique, joint initiative that
involves four valued partners: (1) Cumberland
Pharmaceuticals; (2) Vanderbilt University; (3)
Launch Tennessee – a state-supported network
created to empower Tennessee’s entrepreneurial
ecosystem; and (4) China-based WinHealth
Pharmaceuticals - our international partner.

We focus our collaborative agreements on
universities in the Southeast region of the
United States — institutions that are well-known

for scientific research in a geographic area
that historically has been underserved by the
biopharmaceutical industry. These strategic
collaborations allow us to combine our strengths
and capabilities, as we work with the university
partners to establish arrangements for each
new candidate, support its development, and
pursue opportunities to secure grant funding.

To coordinate this work, CET’s facilities are
situated
in Nashville’s high-tech corridor,
where our Life Sciences Center serves as an
incubator that provides laboratories, offices,
and equipment. The Center also offers
infrastructure for other emerging companies
seeking to develop their technologies, providing
a collaborative environment for our team and
those working in the tenant companies.

CET has formed collaboration agreements with five major academic research institutions:

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Partnerships
Around the World

We have an established infrastructure with the
needed capabilities to support our focus on the
supply of our branded medicines for patients
in the U.S.

We have also built a network of carefully selected
international partners to bring our medicines to
patients in their countries. We have entered into a
series of agreements with a group of distinguished
international companies who have the capabilities
needed to register and commercialize our brands
in their territories.

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1 Tennessee—

Cardinal Health Inc.
provides warehousing,
shipping and other
distribution support for
our products in the U.S.

2 Puerto Rico—

Verity
is our commercial
partner for Vibativ®

3 Qatar —
GerminMED is our
commercial partner

for Caldolor®

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4 India—

Sandor Medicaids Pvt. Ltd.
is our commercial partner
for Caldolor®

7 South Korea—
DB Pharm Korea Co. Ltd. is our
commercial partner for Caldolor®
and Vibativ®

5 China—
WinHealth Pharma Group is
our commercial partner for
Caldolor® and Acetadote®,
as well as an investor in
Cumberland Emerging
Technologies

6 SciClone Pharmaceuticals
is our commercial partner
for Vibativ®

8 Australia & New Zealand—

Seqirus, a CSL Company, is our
commercial partner for Caldolor®

9 Phebra Pty Ltd., is our commercial
partner for Acetadote®

10 Russia—
R-Pharm JSC is our
commercial partner

for Vibativ®

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Our growth strategy involves maximizing the potential of our existing brands while continuing to
build a portfolio of differentiated products. The result of these efforts has strengthened our market
presence, diversified our revenue stream, and delivered positive cash flow from operations in 2021.

Selected Financial Data

(dollars in thousands except per share data)

2017

2018

2019

2020

2021

Net Revenues
Operating Income (Loss)
Net Income (Loss)

$ 26,323

(8,879)
(7,979)

$ 29,345
(11,173)
(6,963)

$ 34,388
(9,288)
(3,538)

$ 37,441
(6,382)
(3,339)

$ 35,985
(7,677)
(3,508)

Cash Flow from Operating Activities

(558)

3,112

3,056

5,415

6,342

Total Assets
Long-Term Obligations
Total Equity

93,232
11,616
63,922

112,694
29,319
55,571

104,549
29,314
51,085

96,463
23,922
46,873

84,460
22,598
42,602

Reconciliation of Net Income (Loss) Attributable to Common
Shareholders to Adjusted Earnings and Adjusted Diluted Earnings
Per Share (1) (Unaudited)

(dollars in thousands except per share data)

2017

2018

2019

2020

2021

71
(8,050)
4,798

Net Income (Loss) Attributable to
Common Shareholders Less: Net loss at $ (7,979)
Subsidiary Attributable
to Noncontrolling Interests
Net Income (Loss)
Discontinued Operations
Net Income (Loss) from Continuing
Operations
Adjustments to Net Income (Loss)
Income Tax Expense (Benefit)
Depreciation and Amortization
Share-Based Compensation
Other Adjustments to Net Income (1)
Interest Income
Interest Expense
Adjusted Earnings

4,175
2,648
1,115
372
(299)
93
$ (4,744)

(12,848)

(6,963)

$ (3,538)

(3,339)

(3,508)

76
(7,039)
3,782

9
(3,547)
5,665

80
(3,419)
3,207

95
(3,603)
1,994

(10,821)

(9,212)

(6,626)

(5,597)

16
2,983
1,365
1,294
(564)
196
(5,531)

(79)
4,404
1,486
–
(243)
246
$ (3,398)

56
4,749
1,047
439
(75)
264
(146)

35
4,606
742
(1,051)
(26)
98
(1,193)

Adjusted Diluted Earnings per Share

(0.29)

(0.35)

(0.22)

(0.01)

(0.08)

Diluted Weighted-Average Common
Shares Outstanding:

16,325

15,614

15,396

15,162

14,905

(1) The supplemental financial measures are Non-GAAP as defined, the reconciliation of these supplemental measures is above.

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2021
Financial
Review

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_________________________________________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

CUMBERLAND PHARMACEUTICALS INC.

A Tennessee Corporation
IRS Employer Identification No. 62-1765329
Commission file number 001-33637

2525 West End Avenue, Suite 950
Nashville, Tennessee 37203
(615) 255-0068

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00 par value per share

CPIX

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Cumberland Pharmaceuticals Inc. is not a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Cumberland Pharmaceuticals Inc. is required to file reports pursuant to Section 13 or Section 15(d) of the Act. Cumberland

Pharmaceuticals Inc. (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Cumberland Pharmaceuticals Inc. has submitted electronically every Interactive Data File required to be submitted and posted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months.

Cumberland Pharmaceuticals Inc. is a non-accelerated filer and a smaller reporting company as defined in Rule 12b-2 of the

Exchange Act and is not a shell company.

Cumberland Pharmaceuticals Inc. has not filed a report on and attestation to its management's assessment of the effectiveness of

its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared and issued its audit report.

The aggregate market value of common stock held by non-affiliates as of June 30, 2021 was $23,775,019. The number of shares

of the registrant’s Common Stock, no par value, outstanding as of March 7, 2022 was 14,840,330.

Certain information required in Part III of Form 10-K is incorporated by reference from the registrant’s Proxy Statement for its 2022

DOCUMENTS INCORPORATED BY REFERENCE

annual meeting of shareholders.

_________________________________________________________________________________________________________

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Index

Page Number

PART I

Item 1: Business

Item 1A: Risk Factors

Item 1B: Unresolved Staff Comments

Item 2: Properties

Item 3: Legal Proceedings

Item 4. Mine Safety Disclosures

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

Item 6: Reserved

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Item 8: Financial Statements and Supplementary Data

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

Item 9A: Controls and Procedures

Item 9B: Other Information

Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

PART III

PART IV

Item 15: Exhibits and Financial Statement Schedules

Item 16: Form 10-K Summary

SIGNATURES

79
85

PART I

Item 1. Business.

THE COMPANY

Cumberland Pharmaceuticals Inc. (“Cumberland,” the “Company,” or as used in the context of “we,” “us,” or
“our”), is a specialty pharmaceutical company focused on the acquisition, development and commercialization of
branded prescription pharmaceutical products. We are dedicated to providing innovative products that improve the
quality of care for patients and address poorly met medical needs.

Our primary target markets are hospital acute care, gastroenterology, rheumatology and oncology. These
medical specialties are characterized by relatively concentrated prescriber bases, that we believe can be served
effectively by small, targeted sales forces. We promote our approved products through our hospital, field and
oncology sales divisions in the United States and are establishing a network of international partners to register and
provide our medicines to patients in their countries.

Our portfolio of brands approved for marketing by the U.S. Food and Drug Administration (“FDA”) includes:

•

Acetadote® (acetylcysteine) injection, for the treatment of acetaminophen poisoning;

Caldolor® (ibuprofen) injection, for the treatment of pain and fever;

• Kristalose® (lactulose) for oral solution, a prescription laxative, for the treatment of constipation;

• Omeclamox®-Pak, (omeprazole, clarithromycin, amoxicillin) for the treatment of Helicobacter pylori (H.

pylori) infection and related duodenal ulcer disease;

• RediTrex® (methotrexate) injection, for the treatment of active rheumatoid, juvenile idiopathic and severe

psoriatic arthritis, as well as disabling psoriasis;

•

Sancuso® (granisetron) transdermal system, for the prevention of nausea and vomiting in patients
receiving certain types of chemotherapy treatment;

Vaprisol® (conivaptan) injection, to raise serum sodium levels in hospitalized patients with euvolemic and
hypervolemic hyponatremia; and

Vibativ® (telavancin) injection, for the treatment of certain serious bacterial infections including hospital-
acquired and ventilator-associated bacterial pneumonia, as well as complicated skin and skin structure
infections.

In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban
product candidates for patients with cardiomyopathy associated with 1) Duchenne Muscular Dystrophy (“DMD”), a
fatal, genetic neuromuscular disease, 2) Systemic Sclerosis (“SSc”) or scleroderma, a debilitating autoimmune
disorder characterized by fibrosis of the skin and internal organs and 3) Aspirin-Exacerbated Respiratory Disease
(“AERD”), a severe form of asthma.

Cumberland has built core competencies in both the development and commercialization of pharmaceutical
products. We have established the capabilities needed to acquire, develop and commercialize branded
pharmaceuticals in the U.S. and believe we can leverage this existing infrastructure to support our expected growth.
Our management team consists of pharmaceutical industry veterans with experience in business development,
product development, regulatory, manufacturing, sales, marketing and finance.

Our business development team identifies, evaluates, and negotiates product acquisition, licensing and co-
promotion agreements. Our product development team creates proprietary formulations, manages our clinical
studies, prepares our FDA submissions and staffs our medical call center. Our quality and manufacturing
professionals oversee the manufacturing, release and shipment of our products. Our marketing and sales
organization is responsible for our commercial activities, and we work closely with our distribution partners to
ensure the availability and delivery of our products.

COVID-19 Pandemic

In early 2020, the U.S. declared a health care emergency following the outbreak of SARS-CoV-2, a novel strain
of coronavirus that causes COVID-19, a respiratory illness. The Company has managed through the resulting
pandemic, continuing to operate our business – keeping facilities open and our organization intact. We moved
quickly to ensure the health and safety of our team. We also maintained our ongoing compliance with the many laws
and regulations that apply to us as a publicly traded pharmaceutical company.

Throughout the pandemic, Cumberland has faced the same challenges affecting other companies that rely on
hospital admissions and patient visits to drive revenue. Our clinical studies were also impacted, as fewer patients
sought elective surgeries and our access to medical facilities was substantially limited. We carefully monitored our
supply chain, including the flow of raw materials and the batches of finished products emerging from the facilities
that manufacture our products.

Despite the challenges of operating during a pandemic, Cumberland has remained committed to our mission of
providing innovative products that improve the quality of care for patients and address poorly met medical needs.
We continued to build our portfolio of innovative and differentiated products through a multifaceted strategy that
includes the development of new candidates and acquisition of established brands. Our resulting, diversified product
line has enabled us to weather external challenges, while our team has remained responsive to the evolving medical
market. We are prepared for and look forward to future opportunities to carry out our mission. Overall, we have
been able to continue the delivery of our products while addressing the interests of our shareholders, employees,
partners and community.

ESG Report

In July 2021, we released our second annual Sustainability Report (the “2020 Sustainability Report”), which
details Cumberland’s activities pertaining to our environmental, social and governance (“ESG”) matters. After
issuing our inaugural ESG Report the prior year (the “2019 Sustainability Report”), we remain committed to
sustainability and to maintaining transparency of our corporate operations. As the largest biopharmaceutical
company founded and headquartered in the Mid-South, we hold ourselves to the highest standards of ethical
practices and understand the importance of recognizing and addressing our impact on our constituents, the
community and the environment.

The 2020 Sustainability Report notes that during that year we provided nearly 2.5 million patient doses of our
products, safely disposed of over 4,000 pounds of expired and damaged products and had no product recalls. We
also had no Company brands listed on the FDA’s MedWatch Safety Alerts for Human Medical Products, no
Company product issues identified by the FDA’s Adverse Event Reporting System and no clinical trials terminated
due to failure to practice good clinical standards.

The 2020 Sustainability Report also highlights our investment in our employees through our continuing
education programs, employee development initiatives and employee recognition awards. We reported that women
represented 46% of Cumberland’s workforce – and 18% of our employees were minorities.

We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since inception. During
2009, we completed an initial public offering of our common shares and listing on the Nasdaq stock exchange. Our
website address is www.cumberlandpharma.com. Our Annual Reports (on Form 10-K), Quarterly Reports (on Form
10-Q), Current Reports (on Form 8-K) and all material press releases are available on our website as soon as
reasonably practicable after their filing with the U.S. Securities and Exchange Commission, (“SEC”). These filings
are also available to the public at www.sec.gov.

PRODUCTS

Acetadote®

Caldolor®

Kristalose®

Products

Indication

Acetaminophen Poisoning

Pain and Fever

Chronic and Acute Constipation

Status

Marketed

Omeclamox®-Pak

H. pylori Infection and Related Duodenal Ulcer Disease

Marketed

RediTrex®

Sancuso®

Vaprisol®

Vibativ®

Acetadote®

Arthritis and Psoriasis

Marketed

Nausea and Vomiting Associated with Chemotherapy

Marketed

Euvolemic and Hypervolemic Hyponatremia

Serious Bacterial Infections

Marketed

Acetadote is an intravenous formulation of N-acetylcysteine, indicated for the treatment of liver toxicity
associated with acetaminophen poisoning. Cumberland developed and obtained U.S. FDA approval for Acetadote,
and then introduced the product through our hospital sales force.

Acetadote is typically used in hospital emergency departments to prevent or lessen potential liver damage
resulting from an overdose of acetaminophen, a common ingredient in many over-the-counter and prescription pain
relieving and fever-reducing products. Acetaminophen overdose continues to be a leading cause of poisonings
reported by hospital emergency departments in the U.S., and Acetadote has become a standard of care for treating
this potentially life-threatening condition.

Acetadote received U.S. FDA approval as an orphan drug, which provided seven years of marketing exclusivity

from the date of approval. That exclusivity has since expired.

In connection with the FDA's approval of Acetadote, we committed to certain post-marketing activities for the
product. Completion of our first Phase IV commitment resulted in the FDA's approval of expanded labeling for the
product for use in pediatric patients. Completion of our second Phase IV commitment resulted in further revised
labeling for the product with FDA approval of additional safety data.

Completion of our third and final Phase IV commitment culminated in the FDA’s approval of a new
formulation for the product. The next generation formulation, contains no ethylene diamine tetracetic acid
(“EDTA”) or other stabilization agent, chelating agent or preservative. Cumberland introduced this new Acetadote
formulation replacing the original form of the product which we no longer manufacture.

The FDA subsequently approved updated labeling for Acetadote revising the product's indication and providing
new dosing guidance for specific patient populations. As a result, dosing guidance is now included for patients
weighing over 100 kg, and new language was added to alert health care providers that, in certain clinical situations,
therapy should be extended for some patients.

The United States Patent and Trademark Office (the “USPTO”) issued us a series of patents associated with our
Acetadote product. These patents are discussed in Part I, Item I – “Business - Trademarks and Patents” - of this
Form 10-K. The FDA has approved several abbreviated new drug applications (ANDA) filed by various generics
companies referencing Acetadote. Those products all possess the old formulation containing EDTA.

We entered into an agreement with Perrigo Company resulting in the distribution of our Authorized Generic
acetylcysteine injection (our “Authorized Generic”) product. Both Acetadote and our Authorized Generic utilize the
new, EDTA-free formulation.

An Illinois judge issued a final ruling in favor of Cumberland Pharmaceuticals Inc. in a patent case associated
with Acetadote. By ruling in Cumberland’s favor, the court upheld the validity of the patent that encompasses our
EDTA-free formulation. The court also granted a permanent injunction preventing challengers from marketing a
generic version of our proprietary Acetadote product formulation before the expiration of Cumberland’s patent in
August 2025. An Appeals Court affirmed the District Court ruling in the Company's favor upholding Cumberland's
Acetadote patent and expressly rejected the validity challenge.

During 2021, we continued to distribute our Acetadote brand, however our Authorized Generic product is now

distributed through Padagis US LLC (formerly a division of Perrigo Company).

Caldolor®

Caldolor, our intravenous formulation of ibuprofen, was the first injectable product approved in the U.S. for the
treatment of both pain and fever. We conducted a series of clinical studies in over 900 adult patients to develop the
data to support our FDA submission for the product's registration. Following a priority review, the FDA approved
Caldolor for marketing in the U.S..

A non-steroidal anti-inflammatory drug (“NSAID”), the product was indicated for use in adults as a sole
treatment for the management of mild to moderate pain and for the management of moderate to severe pain as an
adjunct to opioid analgesics. It was also the first FDA approved intravenous therapy for treating fever.

We then launched Caldolor and continue to promote the product in the U.S. through our hospital sales force.

We completed a series of Phase IV studies to gather additional data to support our Caldolor product. Those
clinical trials involved another 1,000 adult and pediatric patients. These studies included data on a shortened
infusion time and pre-surgical administration of the product. To address our Phase IV commitment to the FDA,
these studies also included evaluation of the product for the reduction of fever in hospitalized children and the
treatment of pain in children undergoing tonsillectomy surgeries.

We then received FDA approval for the use of Caldolor in pediatric patients 6 months of age and older.
Caldolor is the first and only injectable non-steroidal anti-inflammatory drug approved for use in children. We
subsequently initiated a study to collect data on the use of Caldolor in children ranging in age from birth up to 6
months of age. Enrollment in that study was completed in 2019.

In early 2018, we completed and filed the application for FDA approval of a next generation Caldolor product
featuring an improved presentation and formulation which was approved in January 2019. The new, premixed
presentation provides healthcare professionals a formulation that is easy to administer, helping manage the treatment
of patient pain and fever, while reducing opioid consumption. It is provided in a pre-mixed bag containing 800 mg
of ibuprofen in a 200 mL patented low sodium formulation for injection that is ready to use. It is the first and only
FDA-approved pre-mixed bag of ibuprofen. Caldolor is still available as an 800 mg/8mL single–dose vial for
dilution in addition to the ready-to-use bag.

In January 2020, we initiated a full-scale launch of this ready-to-use product. Unfortunately, the launch was
impacted by the COVID-19 pandemic and the resulting postponement of elective surgeries. Nonetheless, we expect
an improved performance of the product after the pandemic abates and more accounts gain access to the new
presentation.

During 2021, we distributed both the vial and the ready-to-use premixed bag presentations of Caldolor. In
November 2021 the FDA approved our submission to expand the labeling for Caldolor to include administration of
the product prior to surgery. During our clinical studies we found that the product delivered its best results when
dosed prior to surgery, reducing both patient pain as well as their need for opiates.

Kristalose®

Kristalose is a prescription laxative administered orally for the treatment of acute and chronic constipation. An
innovative, dry powder crystalline formulation of lactulose, Kristalose is designed to enhance patient acceptance and
compliance. It is the only prescription laxative available in pre-measured powder packets.

Kristalose dissolves easily in 4 ounces of water, offering patients a virtually taste-free, grit-free and essentially
calorie-free alternative to lactulose syrups. We conducted a preference study which indicated that 77% of patients
surveyed prefer the taste, consistency and portability of Kristalose over similar products in syrup forms.

We acquired the assets and exclusive rights to Kristalose through a series of transactions, then assembled a
dedicated field sales force which re-launched the product as a Cumberland brand. We directed our sales efforts to
physicians who are the most prolific writers of prescription laxatives, including gastroenterologists and internists.
We supplemented this personal promotion with telemarketing campaigns to expand our reach and support of the
product. Using preference data as a cornerstone of our marketing efforts, we repositioned the brand, enhancing
patient affordability through a coupon program and expanded managed care coverage for the product.

We added a co-promotion partner, Poly Pharmaceuticals, who is promoting Kristalose to physician targets not
covered by our field sales forces. We then added another partner, Foxland Pharmaceuticals, Inc., who is repackaging
Kristalose and featuring it with additional new physician targets.

During 2021 we continued to support Kristalose through our field sales force as well as our partnerships with

Poly Pharmaceuticals and Foxland Pharmaceuticals, Inc.

Omeclamox®-Pak

Many ulcers of the gastrointestinal tract are caused by an infection from the Helicobacter pylori (“H. pylori”)
bacterium. Omeclamox-Pak is a branded prescription product used for the treatment of these infections and the
related duodenal ulcer disease. This innovative product combines three well-known and widely prescribed
medications: omeprazole, clarithromycin, and amoxicillin.

Omeclamox-Pak was the first FDA approved triple therapy combination medication to contain omeprazole as
the proton pump inhibitor, which works to decrease the amount of acid the stomach produces. Clarithromycin and
amoxicillin are both antibiotic agents that hinder the growth of the H. pylori bacteria. Interaction of these agents
allows the stomach lining to heal effectively. The medications are packaged together on convenient daily dosing
cards, making it simple to follow the twice a day dosing before meals.

We acquired the assets and exclusive rights to Omeclamox-Pak through a series of transactions and re-launched

the product as a Cumberland brand supported by our field sales force.

The packager for Omeclamox-Pak encountered financial difficulties in 2020 due to the impact of COVID-19,
and their operations are currently suspended. As a result we depleted our inventory of the product and notified the
FDA that the product is currently unavailable. We are awaiting resumption of those operations, while also exploring
other alternatives to restart the product’s packaging.

RediTrex®

We have entered into an exclusive license and supply agreement to register and commercialize a methotrexate
product line in the United States. RediTrex is a new line of pre-filled syringes specifically designed for ease of
handling and dosing accuracy for the subcutaneous administration of methotrexate in patients with arthritis and
psoriasis.

RediTrex treats patients with severe, active rheumatoid arthritis, and polyarticular juvenile idiopathic arthritis
who have difficulty tolerating or responding to orally delivered methotrexate. It is also approved for symptomatic
control of severe, recalcitrant, disabling psoriasis in adults who are not adequately responsive to other forms of
therapy.

With more than 54 million Americans living with some form of arthritis, the disease is among the most common
causes of work disability in the U.S., according to the CDC. The oral form of methotrexate is typically the first line
of treatment for rheumatoid arthritis. As the disease progresses, the dose must be increased to stay effective, often
causing intolerable gastrointestinal side effects.

Injectable methotrexate has been proven to be more effective than oral delivery, with fewer gastrointestinal
reactions. Because of the increased efficacy and tolerability, injectable methotrexate can delay the need to move to
costly biologics, lowering overall patient treatment costs. Once disease progression requires the use of biologics,
continuing the treatment of injectable methotrexate along with the biologic has been shown to increase overall
efficacy.

Other injectable methotrexate options available may not optimally meet the needs of arthritis patients who are
offered either a vial and syringe for self-injection, or the use of an expensive autoinjector. The vial and syringe
method can be difficult for a patient to handle due to limited dexterity in their hands. Additionally, obtaining the
exact dose needed while preventing skin exposure to the caustic methotrexate can be quite challenging for many
patients. The autoinjectors provide a better alternative to the vial and syringe, but they remove injection control from
the patient and can be painful to administer. They are also the most expensive methotrexate delivery.

In December 2019, we received FDA approval for RediTrex and began planning for a launch of the product
line. In late 2020, we received initial product supplies and then provided shipments of RediTrex to select accounts.
Due to the pandemic, we delayed the national launch of the product, which was then implemented during the fourth
quarter of 2021.

Sancuso®

At the end of 2021, we entered into an agreement with Kyowa Kirin to acquire the U.S. assets and rights to
Sancuso® (granisetron transdermal system), an FDA-approved oncology supportive care medicine. This transaction
closed in January 2022.

Sancuso® is the first and only FDA-approved prescription patch for the prevention of nausea and vomiting in
patients receiving certain types of chemotherapy treatment for their cancer. The active drug in Sancuso®,
granisetron, slowly dissolves in the thin layer of adhesive that sticks to the patient’s skin and is released into their
bloodstream over several days, working continuously to prevent chemotherapy-induced nausea and vomiting
(CINV). It is applied 24 to 48 hours before receiving chemotherapy and can prevent CINV for up to five consecutive
days. Alternative oral treatments must be taken several times (day and night) to deliver the same therapeutic doses.

In early 2022 we assumed full commercial responsibility for the product in the U.S. – including its marketing,
promotion, distribution, manufacturing, and medical support activities. Kyowa Kirin will retain international rights,
continuing to deliver the product to address oncology patients’ needs throughout the rest of the world. In January
2022, we began shipments of the product and formed a new sales force, Cumberland Oncology, to support the brand.

Vaprisol®

We acquired the assets and rights to Vaprisol, a prescription brand indicated to raise serum sodium levels in
hospitalized patients with euvolemic and hypervolemic hyponatremia. It is one of two branded prescription products
indicated for the treatment of hyponatremia, and the only intravenously administered branded treatment.

Hyponatremia, an imbalance of serum sodium to body water, is the most common electrolyte disorder among
hospitalized patients. These electrolyte disturbances occur when the sodium ion concentration in the plasma is lower
than normal and are often associated with a variety of critical care conditions including congestive heart failure, liver
failure, kidney failure and pneumonia. Vaprisol raises serum sodium to appropriate levels and promotes free water
secretion. Our Vaprisol product is one of two branded prescription products indicated for the treatment of
hyponatremia, and the only intravenously administered branded treatment. It has a proven day-one response rate to
normalize serum sodium levels in hyponatremic patients and move them out of the Intensive Care Unit as efficiently
as possible.

Vaprisol is supported by our hospital sales division. Demand for the product increased in 2020 during the
pandemic, and we worked to support the expanded use of the product in hospitals and clinics during the health care
crisis. During 2021, we shipped all remaining inventory of the product and have notified the FDA that supplies of
the product are not currently available. We have transferred manufacturing of the product to a new manufacturing
facility, and await the submission and FDA approval for the new facility before resuming shipments. We are also
exploring alternatives for providing an interim supply to the market while awaiting the needed approval.

Vibativ®

In November 2018, the Company announced an agreement to acquire the Vibativ assets and assume global
responsibility for the brand including the related marketing, distribution, manufacturing and regulatory activities. In
early 2021 we introduced the Cumberland-packaged product, which is supported by our hospital sales force.

Vibativ is a patented, FDA-approved injectable anti-infective. It is designed to treat serious infections due to
Staphylococcus aureus (S. aureus) and other Gram-positive bacteria, including Methicillin-resistant Staphylococcus
aureus (MRSA) and Methicillin-sensitive Staphylococcus aureus (MSSA). Vibativ addresses a range of Gram-
positive bacterial pathogens, including those that are considered difficult-to-treat and multidrug-resistant.

Vibativ can serve as a potentially life-saving treatment in patients with hospital-acquired and ventilator-

associated pneumonia resulting from infections including the flu and COVID-19.

Pneumonia caused by secondary bacterial infections is common among patients with viral respiratory
infections. The risk of such infections grows as hospitals see more patients with respiratory symptoms due to
COVID-19. Research shows that hospital-acquired pneumonia (“HAP”) and ventilator-associated pneumonia
(“VAP”) have historically accounted for 22% of common hospital-acquired infections. Methicillin-sensitive and
methicillin-resistant S. aureus (“MSSA” and “MRSA”) are important disease-causing pathogens in these cases.

While many recently introduced antibiotics are quickly losing the battle to fight the bacteria they were designed
to kill because those bacteria have become drug-resistant, Vibativ was specifically designed to kill drug-resistant
bacteria.

The molecule of an existing antibiotic to which bacteria had developed a resistance, vancomycin, was altered by
adding a lipophilic (fat-loving) component and a hydrophilic (water-loving) component. The lipophilic addition
increases Vibativ’s ability to penetrate the cell wall and inhibits the formation of new cell walls (the development of
new and/or additional cell walls is the most common way that bacteria become resistant to drugs). The hydrophilic
addition increases Vibativ’s penetration into tissue – so it is able to attack infections that are not reachable by other
antibiotics. In comparison to vancomycin, Vibativ is 32 times more potent against MRSA strains when tested under
in vitro conditions. Further, in clinical trials, Vibativ demonstrated superior cure rates of patients with hospital-
acquired bacterial pneumonia.

PIPELINE

Ifetroban Clinical Studies

Ifetroban is a selective thromboxane-prostanoid receptor (“TPr”) antagonist dosed in nearly 1,400 subjects and
found to be safe and well tolerated in healthy volunteers and various patient populations. We are currently
sponsoring a series of Phase II clinical programs to evaluate our ifetroban product candidates in 1) Aspirin-
Exacerbated Respiratory Disease, a severe form of asthma, 2) Systemic Sclerosis or scleroderma, a debilitating
autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs and 3) patients with
cardiomyopathy associated with Duchenne Muscular Dystrophy, a genetic neuromuscular disease that results in
deterioration of the skeletal, heart and lung muscles.

Enrollment in our clinical studies was interrupted due to the COVID-19 pandemic. However, many of our
clinical study sites have reopened and resumed screening of patients for potential participation into our studies
during 2021. We also closed unproductive sites and opened qualified replacements during the year. We are awaiting
results from the studies underway before deciding on the best development path for the registration of ifetroban, our
first new chemical entity.

Follows is more information about the clinical programs in which we are evaluating ifetroban:

Aspirin-Exacerbated Respiratory Disease ("AERD")

We have completed the manufacturing and initiated clinical development of an oral formulation of ifetroban
under the brand name Boxaban®. We are evaluating this candidate for patients suffering from Aspirin-Exacerbated
Respiratory Disease ("AERD"), also known as Samter’s Triad, a chronic medical condition that consists of three
clinical features: asthma, sinus disease with nasal polyposis and sensitivity to aspirin. AERD is characterized by
sharp increases in inflammatory mediators and platelet activity within the respiratory system. Approximately one in
20 asthmatic adults in the U.S. suffer from AERD and awareness of the disease is growing within the medical
community. There is no U.S. approved pharmaceutical treatment for AERD.

Preclinical studies at Harvard revealed that ifetroban blocks all features of the asthma reaction triggered by
aspirin highlighting the important role of TPr in AERD. Our Harvard collaborators were awarded a $5 million
National Institutes of Health grant to evaluate oral ifetroban in approximately 45 AERD patients undergoing aspirin
desensitization in a phase II clinical trial. Patient enrollment in this trial is well underway.

We completed an initial Phase II clinical study at several U.S. medical centers led by the Scripps Research
Institute entitled, A Multicenter, Double-blind, Randomized, Placebo-Controlled Trial to Determine the Safety of
Oral Ifetroban in Patients with a History of AERD. That study randomized 16 subjects 3:1 (ifetroban: placebo),
demonstrated no safety concerns and provided several signals of efficacy. A follow-on phase II study designed to
evaluate the safety and efficacy of eight weeks of oral ifetroban entitled, A Phase 2 Multicenter, Double-blind,
Randomized, Placebo- Controlled Trial to Evaluate Oral Ifetroban in Subjects with Symptomatic Aspirin
Exacerbated Respiratory Disease (AERD), was then initiated. The study is progressing with patient enrollment
ongoing at multiple U.S. sites.

Systemic Sclerosis ("SSc")

Next, we initiated the clinical development of ifetroban oral capsules under the brand name Vasculan® for the
treatment of Systemic sclerosis, also called scleroderma. It’s a debilitating autoimmune disorder characterized by
diffuse fibrosis of the skin and internal organs, including the heart, as well as vascular dysfunction. SSc has a high
morbidity and the highest case-specific mortality of any rheumatic disorder with 50% of patients dying or
developing major internal organ complications within three years of diagnosis. Although several medications are
used to treat the skin disease associated with SSc, there is no universally effective treatment to improve the function
of affected internal organs including the cardiovascular system.

Cardiac involvement associated with SSc is often underestimated due to its subtle and atypical presentation.
Despite the cardiovascular events associated with its elevated mortality at later stages of the disease, overt signs are
suggestive of advance disease including myocardial or pericardial inflammation, heart failure and pulmonary arterial
hypertension (PAH).

Our Vanderbilt collaborators completed preclinical studies demonstrating TPr blockade with ifetroban prevents

cardiac fibrosis and can restore cardiac function in animal models of PAH.

The FDA cleared our IND application to evaluate 12 months of oral ifetroban (Vasculan) in a 34-subject phase
II trial entitled, A Phase II Randomized, Double-Blind, Placebo-Controlled Study to Assess the Safety and Efficacy
of Ifetroban in Patients with Diffuse Cutaneous Systemic Sclerosis or Systemic Sclerosis-Associated Pulmonary
Arterial Hypertension. Enrollment in this study is also well underway and includes patients with diffuse cutaneous
SSc, as well as those with pulmonary arterial hypertension associated with their SSc.

Duchenne Muscular Dystrophy ("DMD")

We also initiated the clinical development of oral ifetroban under the brand name Dyscorban® for the treatment
of cardiomyopathy associated with Duchenne Muscular Dystrophy (“DMD”), a rare and fatal disease caused by a
genetic defect which leads to inexorable muscle damage. Cardiomyopathy is the leading cause of death in DMD
patients. TPr and its ligand, isoprostanes, are found to have increased in DMD patients.

Preclinical studies by our Vanderbilt collaborators demonstrated TPr blockade by ifetroban prevented cardiac
dysfunction and improved mortality in several animal models of muscular dystrophy. These results published in the
Journal of the American Heart Association suggest TPr activation contributes to DMD cardiomyopathy and
blockade with ifetroban may serve as a novel therapeutic for DMD patients.

The FDA cleared Cumberland’s application to evaluate 12 months of oral ifetroban (Dyscorban) in a Phase II
study entitled, A Randomized, Double-Blind, Placebo-Controlled, Multiple Dose Study with an Open-Label
Extension to Determine the Safety, Pharmacokinetics and Efficacy of Oral Ifetroban in Subjects with Duchenne
Muscular Dystrophy. With medical centers across the U.S. screening patients, our clinical study is enrolling those
with 48 ambulatory and non-ambulatory DMD, 7 years of age and older with stable cardiac function.

Cumberland was awarded just over $1 million in federal funding to support this clinical trial, which is the first
DMD clinical study awarded FDA Orphan Product Development funding. As a result of the COVID-19 pandemic
and its global impact on clinical research in 2020, the FDA awarded a supplemental grant in support of our Phase II
DMD study.

Progressive Fibrosing Interstitial Lung diseases (“PF-ILDs”)

In September 2021, our Board of Directors approved a new clinical program for the use of ifetroban to treat
Progressive Fibrosing Interstitial Lung Diseases (“PF-ILDs”). Nonclinical studies are complete, and the resulting
manuscript was prepared and submitted for publication in 2021. A Phase II clinical study is planned and an
application to the FDA is in preparation to support this new clinical program.

Other Ifetroban Programs

We have also completed Phase II clinical programs with ifetroban in patients with Hepatorenal Syndrome
(“HRS”) and patients with Portal Hypertension (“PH”). Additional preclinical and pilot clinical studies of ifetroban
are underway, including several investigator-initiated trials.

New Hospital Product Candidate

Cumberland was responsible for the formulation, development and FDA approval of both Acetadote and
Caldolor. Our Medical Advisory Board has helped us identify additional opportunities that address unmet or poorly
met medical needs. As a result, Cumberland has successfully designed, formulated and completed the preclinical
studies for a cholesterol reducing agent for use in the hospital setting.

We have completed a Phase I study which defined the pharmacokinetic properties and provided a favorable
safety profile for this new product candidate. The study results and a proposed clinical development plan were
discussed with the FDA. A Phase II study has been initiated and patient enrollment is complete. We have also
completed the clinical study report, filed it with the FDA and are now determining the next steps for this program.

GROWTH STRATEGY

Cumberland's growth strategy involves maximizing the potential of our existing brands while continuing to
build a portfolio of differentiated products. We currently feature eight, including Sancuso, FDA products approved
for sale in the United States. Through our international partners, we are also working to bring our medicines to
patients in their countries. Additionally, we look for opportunities to expand our products into additional patient
populations through clinical trials, new presentations and our support of select, investigator-initiated studies. We
actively pursue opportunities to acquire additional marketed products, as well as late-stage development product
candidates in our target medical specialties. Our clinical team is developing a pipeline of new product candidates
largely to address poorly met medical needs.

We are supplementing these activities with the earlier stage drug development at Cumberland Emerging
Technologies (“CET”), our majority-owned subsidiary. CET partners with academic research institutions to identify
and support the progress of promising new product candidates, which Cumberland has the opportunity to further
develop and commercialize.

Specifically, we are seeking long-term sustainable growth by:

Supporting and expanding the use of our marketed products. We continue to evaluate our products following
their FDA approval to determine if additional clinical data could expand their market and use. We will continue to
explore opportunities for label expansion to bring our products to new patient populations. As examples, we have
secured pediatric approval, expanding the labeling for both our Acetadote and Caldolor brands.

Selectively adding complementary brands. In addition to our product development activities, we are also seeking
to acquire products or late-stage development product candidates to continue to build a portfolio of complementary
brands. We focus on under-promoted, FDA-approved drugs as well as late-stage development products that address
poorly met medical needs. We will continue to target product acquisition candidates that are competitively
differentiated, have valuable intellectual property or other protective features, and allow us to leverage our existing
infrastructure. Our acquisition of Vibativ and Sancuso are examples of this strategy.

Progressing clinical pipeline and incubate future product opportunities at CET. We believe it is important to
build a pipeline of innovative new product opportunities, as we are doing though our ifetroban Phase II development
programs. We are also supplementing our acquisitions and late-stage development activities with early-stage drug
development activities with CET. CET partners with universities and other research organizations to develop
promising, early-stage product candidates, which Cumberland has the opportunity to further develop and
commercialize.

Leveraging our infrastructure through co-promotion partnerships. We believe that our commercial
infrastructure can help drive prescription volume and product sales. We look for strategic partners that can
complement our capabilities and enhance opportunities for our brands. For example, our co-promotion partnerships
have allowed us to expand the support for Kristalose across the U.S.

Building an international contribution to our business. We have established our own commercial capabilities,
including three sales divisions, to cover the U.S. market for our products. We are also building a network of select
international partners to register our products and make them available to patients in their countries. We will
continue to develop and expand our network of international partners while supporting our partners’ registration and
commercialization efforts in their respective territories. The acquisition of Vibativ resulted in several new
international partners and market opportunities.

Managing our operations with financial discipline. We continually work to manage our expenses in line with our
revenues in order to deliver positive cash flow from operations. We remain in a strong financial position, with
favorable gross margins, and a strong balance sheet.

SALES AND MARKETING

Cumberland's sales and marketing team has broad industry experience in selling branded pharmaceuticals. Our
sales and marketing executives direct our national marketing campaigns and maintain key national account
relationships. They also manage our dedicated hospital, field and oncology sales forces – which are comprised of
approximately 60 sales professionals.

Hospital market: We promote Caldolor, Vaprisol, Acetadote, and Vibativ through our dedicated hospital
sales division. This organization targets key hospitals across the U.S. and is comprised of sales
professionals with substantial experience in the hospital market. Independent market data continues to
indicate that the majority of pharmaceutical promotional spending is directed toward large, outpatient
markets on drugs intended for chronic use rather than short-term, hospital use.

We believe the hospital market is under-served and highly concentrated, and that it can be penetrated
effectively by a small, dedicated sales force without large-scale promotional activity. Our established
position in the hospital market provided the rationale for adding Vibativ as our first infectious disease
product that complements our hospital product line. Our strategy has been to focus our hospital sales team
on select, high priority accounts.

Gastroenterology and rheumatology market: We promote Kristalose, Omeclamox-Pak and RediTrex
through a dedicated field sales team addressing a targeted group of physicians who are large prescribers of
the products. Because the markets for gastrointestinal and rheumatology diseases are broad in patient scope,
yet relatively narrow in physician base, we believe they provide opportunities that can be penetrated with a
modest sized sales force. We believe that we can increase market share for these products through our sales
and marketing activities.

Oncology market: In early 2022, we formed a new oncology sales force to promote our Sancuso brand.
This division is initially comprised of seven individuals who formerly supported Sancuso for Kyowa Kirin.
This organization targets key oncologists and clinics across the U.S. and is comprised of both insider and
field based sales professionals. This initial group can be expanded through additional personnel or
augmented through a co-promotion partner.

Our commercial executives conduct ongoing analyses to evaluate marketing campaigns and promotional
programs in support of our brands. The evaluations include development of product profiles, testing of the profiles
against the needs of the market, determining what additional product information or development work is needed to
effectively market the products and preparing financial forecasts.

We utilize professional branding and packaging as well as promotional items to support our products, including
direct mail, sales brochures, journal advertising, educational and reminder leave-behinds, patient educational pieces,
coupons, and product sampling. We also regularly attend select medical meetings and trade shows to expand the
awareness of our products.

Our national accounts team is responsible for key large buyers and related marketing programs. This team
maintains relationships with our wholesaler customers as well as with third-party payors such as group purchasing
organizations, pharmacy benefit managers, hospital buying groups, out-patient centers, state and federal government
purchasers and health insurance companies.

MATERIAL CUSTOMERS

Our primary customers are wholesale pharmaceutical distributors in the United States. Total revenue by
customer for each customer representing 10% or more of consolidated gross revenues are summarized below for the
year ended December 31, 2021:

Customer 1
Customer 2
Customer 3

2021
27%
24%
20%

INTERNATIONAL PARTNERSHIPS

We have established our own capabilities to support the commercialization of our products in the U.S. Our
international strategy is to identify and partner with other companies that have the appropriate capabilities to support
our products in their respective countries. We have entered into a series of agreements to establish an international
network, which is summarized in the table below and includes information on our primary partners:

International Partner

Product(s)

Territory

Status

Phebra Pty Ltd

Acetadote

Australia and New Zealand

DB Pharm Korea Co., Ltd.

Caldolor

South Korea

Seqirus (a CSL company)

Caldolor

Australia and New Zealand

Sandor Medicaids Pvt. Ltd.

GerminMED

R-Pharm JSC

SciClone Pharmaceuticals, Inc.

WinHealth Pharma Group Co.

Caldolor

Vibativ

Caldolor &
Acetadote

India, Pakistan, Bangladesh and Nepal

Qatar

Russia

China and Hong Kong

Marketed
Marketed

Marketed

Registration

Development

Our international commercialization agreements include a license to one or more Cumberland products for a
specific territory as noted in the table above. We seek partners who have the local infrastructure to support the
registration and commercialization of our products in their territory.

Under the terms of our agreements our partners are responsible for:

•

Seeking regulatory approvals for the products;

Launching the brand;

Managing the ongoing marketing, sales and product distribution;

Addressing the ongoing regulatory requirements in the international territories;

Remitting any upfront, regulatory and sales milestone payments;

Providing the transfer price for supplies of product; and

Calculating and paying any royalties, as applicable.

Our responsibilities include:

•

Providing a dossier of relevant information to support product registration;

Maintaining our intellectual property associated with the product;

Sharing our marketing strategy, experience and materials for the brand; and

Manufacturing and providing finished product for sale.

During 2021, we worked to support our existing international partners, conclude unproductive arrangements and

identify new companies to represent our products in select additional territories.

BUSINESS DEVELOPMENT

Since inception, we have had an active business development initiative focused on acquiring rights to marketed
products and product candidates that fit our strategy and target markets. We source business development
opportunities through our international network of advisory firms and individual pharmaceutical industry and
medical advisors. A multi-disciplinary internal management team reviews these opportunities on a regular basis
using a group of selection criteria. We have historically focused on product opportunities that are a strategic fit with
our commercial organization, development expertise and medical focus, employing a variety of transaction
structures.

We have continued to build our product portfolio of complementary, niche brands largely through product

acquisitions and late-stage development of product candidates.

Our primary targets are under-promoted, FDA - approved drugs with existing brand recognition and late-stage
development product candidates that address unmet or poorly met medical needs in the hospital acute care and
gastroenterology, rheumatology and oncology markets. We believe that by focusing mainly on approved or late-
stage products, we can minimize the significant risk, cost and time associated with drug development.

We continue to strategically review our brands, pipeline and capabilities, as well as our international partners.
We believe that it is prudent to continually evaluate our product portfolio, partners, and organization in order to
ensure a proper focus and the needed supporting capabilities.

International Partners

D.B. Pharm Korea Co., Ltd. (“D.B. Pharm”) has licensed our Caldolor product for the South Korean market,
and they obtained regulatory approval for Caldolor in their country. During 2021 D.B. Pharm continued to purchase
supplies of Caldolor and distributed the brand in South Korea. We have also entered into agreements with D.B.
Pharm to register and commercialize our Vaprisol and Vibativ brands in their country. During 2021 we worked with
them to prepare the submissions for the approval of each brand there.

We have executed a License and Distribution agreement with HongKong WinHealth Pharma Group Co.
Limited (“WinHealth”) for our Caldolor and Acetadote brands in China and Hong Kong. Under the terms of the
agreement, WinHealth will provide development milestone payments and purchase supplies of the products
following their registration in China.

We also entered into a Strategic Alliance agreement with WinHealth to explore future business opportunities
that will further the mission and goals of each organization. Founded in Hangzhou, China and currently
headquartered in Hong Kong, WinHealth has developed a wide breadth of capabilities including drug licensing,
product development and registration, and has established a strong network of distribution and sales promotional
capabilities for the Chinese market. WinHealth has established partnerships with international companies that
include Boehringer-Ingelheim, Janssen, Novartis, Pfizer, and Roche, generating several hundred million dollars in
sales annually.

In August 2020, we entered into an agreement with WinHealth Investment (Singapore) Ltd creating WHC
Biopharmaceuticals, Pte. Ltd. The joint venture will focus on acquiring, developing, registering, and
commercializing development stage and commercial stage biopharmaceuticals for China, Hong Kong and other
Asian markets.

R-Pharma JSC (“R Pharma”) has licensed our Vibativ product for a territory that includes Russia and a number
of adjacent countries in Eastern Europe. R-Pharma is one of the leading multinational pharmaceutical organizations
based in Russia. Headquartered in Moscow and focusing in a wide breadth of therapeutic areas in the specialty and
hospital care markets, R-Pharma generates $1 billion in annual revenue. R-Pharma has registered Vibativ in Russia
and during 2021 continued to purchase supplies of the product for that market. In late 2021 we entered into a new
agreement with R-Pharma for the terms associated with the supply of Vibativ for greater Russian territory.

SciClone Pharmaceuticals (Holdings) Limited (“SciClone”) has licensed our Vibativ product for sale and
distribution in China and several adjacent countries. In February 2021, SciClone completed an initial public offering
and listing of their shares on the Hong Kong stock exchange.

In June 2021, SciClone submitted an application to the Chinese regulatory authority for the approval of Vibativ
in that country. In October 2021, we were informed by SciClone that the filing was accepted by the regulatory
agency for review. SciClone expects a review period of up to twelve months for their application and believes that
the potential for Vibativ in China may be significant.

In August 2021, we signed an agreement with Verity Pharmaceuticals International Limited (“Verity”) to
license and commercialize our Vibativ product in Puerto Rico. Verity is a specialty pharmaceutical company with
commercial operations in the U.S. and Canada. They have a particular strength and experience in the Puerto Rican
market.

Poly Co-Promotion Agreement

We entered into a co-promotion arrangement with Poly Pharmaceuticals, Inc. (“Poly”) for our Kristalose
product in 2017. Poly is a privately held U.S. specialty pharmaceutical company that is featuring Kristalose to an
expanded number of physicians. Poly’s sales organization is more than doubling the number of nationwide
physicians that are reached with the Kristalose brand message. During 2019, we extended our co-promotion
arrangement with Poly.

2R and Foxland Agreements

During 2018, we entered into another co-promotion arrangement related to our Kristalose product. We have
agreements with 2R Investments, LLC and with Foxland Pharmaceuticals, Inc. to package, distribute and promote
an authorized generic form of our Kristalose product to physician targets that we do not cover.

Nordic License Agreement

We acquired the exclusive U.S. rights to Nordic Group B.V.'s injectable methotrexate product line. The product
line is approved for patient use in various European countries. Cumberland has registered and is commercializing
the methotrexate products under the brand name RediTrex. The products are designed for the treatment of active
rheumatoid arthritis, juvenile idiopathic arthritis, severe psoriatic arthritis, and severe disabling psoriasis. Following
the FDA approval for RediTrex, we began introducing the product line during 2020 and commenced the full national
launch in October 2021.

Clinigen Strategic Dissolution Agreement

We previously entered into an agreement with the Clinigen Group plc ("Clinigen"), an international specialty
pharmaceutical and services company, to commercialize select Clinigen products in the U.S. In May 2016, we
announced an agreement with Clinigen to acquire an exclusive license and commercialize Ethyol® in the U.S. We
then announced in January 2017, our second agreement with Clinigen to acquire an exclusive license and launch
Totect® in the U.S.

During May 2019, following a strategic review of our partners, products and organization, we entered into a
Dissolution Agreement with Clinigen in which Cumberland returned the exclusive rights to commercialize Ethyol
and Totect in the United States to Clinigen. Under the final terms of the amended Dissolution Agreement we
transitioned from our current arrangement with Clinigen effective December 31, 2019. Under the terms of the
agreement, Cumberland was no longer involved directly or indirectly with the distribution, marketing and promotion
of either Ethyol or Totect or any competing products. In exchange for the return of these product license rights and
not competing with either product, we received $5 million in financial consideration paid over the two- years ending
December 31, 2021.

CET University Collaboration Agreements

Through CET, we collaborate with a select group of academic research institutions located in the mid-south
region of the U.S. to identify, co-develop and seek grant funding for promising biomedical technologies emerging
from those research institutions. CET is collaborating with Vanderbilt University, the University of Mississippi, the
University of Tennessee Research Foundation, Louisiana State University, and the Medical University of South
Carolina. CET has entered into a series of agreements to access and collaborate on the development of innovative
product candidates. These arrangements enable CET to team with university-based researchers to advance their
scientific discoveries and breakthroughs by designing new product candidates to improve patient care and address
unmet medical needs. CET has been able to help secure federal small business grant funding to support these various
projects.

In addition, CET operates a Life Sciences Center in downtown Nashville to house its own research and

development activities while providing laboratory space for other biomedical ventures.

CLINICAL AND REGULATORY AFFAIRS

We have in-house capabilities for the management of our clinical, professional and regulatory affairs. Our team
develops and manages our clinical trials, prepares regulatory submissions, manages ongoing product-related
regulatory responsibilities and manages our medical information call center. Team members have been responsible
for devising the regulatory and clinical strategies for all our products as well as obtaining FDA approvals for
Acetadote, Caldolor and RediTrex brands.

Clinical Development

Our clinical development personnel are responsible for:

•

creating clinical development strategies;

designing, implementing and monitoring our clinical trials; and

creating case report forms and other study-related documents.

Regulatory and Quality Affairs

Our internal regulatory and quality affairs team is responsible for:

•

preparing and submitting INDs for clearance to begin patient studies;

preparing and submitting NDAs and fulfilling post-approval marketing commitments;

• maintaining investigational and marketing applications through the submission of appropriate reports;

•

submitting supplemental applications for additional label indications, product line extensions and
manufacturing improvements;

evaluating regulatory risk profiles for product acquisition candidates, including compliance with
manufacturing, labeling, distribution and marketing regulations;

• monitoring applicable third-party service providers for quality and compliance with current Good
Manufacturing Practices ("GMPs"), Good Laboratory Practices ("GLPs"), and Good Clinical Practices
("GCPs"), and performing periodic audits of such vendors; and

• maintaining systems for document control, product and process change control, customer complaint.

PROFESSIONAL AND MEDICAL AFFAIRS

Our medical team provides in-house, medical information support for our marketed products. This includes
interacting directly with healthcare professionals to address any product or medical inquiries through our medical
information call center and medical science liaisons. In addition to coordinating the call center, our clinical/
regulatory group generates medical information letters, provides informational memos to our sales forces and assists
with ongoing training for the sales forces.

CLINICAL DEVELOPMENT AND STUDY RESULTS

Vibativ Clinical Manuscripts

Vibativ is a patented, FDA-approved injectable anti-infective for the treatment of certain serious bacterial
infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin
structure infections. It addresses a range of Gram-positive bacterial pathogens, including those that are considered
difficult-to-treat and multidrug-resistant.

In late 2019, we announced a publication in Infectious Diseases and Therapy, with study results showing
numerically superior cure rates of telavancin compared to vancomycin within a subset of patients who were enrolled
in Phase 3 ATTAIN trials and had hospital-acquired pneumonia caused by bacteria with low susceptibility to
vancomycin. Additionally, an online publication in Drugs - Real World Outcomes, detailed the positive clinical
outcomes that resulted from treating multiple infection types with Vibativ, including complicated skin infections,
bone and joint infections, bacteremia and endocarditis, and lower respiratory tract infections.

In May 2020, Cumberland announced a new study published in Drugs - Real World Outcomes, detailing the
positive clinical outcomes that resulted from treating patients with bacteremia or endocarditis with Vibativ. This
publication is a sub analysis of The Telavancin Observational Use Registry (TOUR™), a study conducted to record
population characteristics, prescription information, and real-world clinical outcomes of patients with Gram-positive
infections treated with Vibativ. The analysis suggests Vibativ is a promising and viable option for patients with
bacteremia or endocarditis, including those with MRSA or another S. aureus pathogen.

Additionally, in May 2020, we announced the publication of two studies confirming the continued in vitro
potency of telavancin. Both publications were part of continued surveillance of telavancin activity since 2011. The
first publication tested a global collection of 24,408 Gram-positive clinical isolates, and the second publication
tested a U.S. collection of 15,882 S. aureus isolates. Both studies documented the sustained in vitro antimicrobial
activity and spectrum of telavancin—many years after its clinical approval—against Gram-positive clinical isolates
collected worldwide over seven years, from 2011 through 2017.

Caldolor Clinical Manuscripts

In July 2020, we announced a study published in the Journal of Orthopedic Trauma, evaluating the efficacy of
Caldolor administration in the management of acute pain in orthopedic trauma patients. The study also measured
Caldolor’s ability in minimizing opioid use. This single-center, randomized, double-blind, placebo-controlled study
found that Caldolor (ibuprofen) Injection reduced the quantity of opioids required to manage pain after a traumatic
injury with fracture. In addition, the time to first narcotic medication was longer in the Caldolor group than with
hospital standard of care. Pain was also managed better in the Caldolor group compared to standard of care
narcotics.

Additionally, in August 2020, we announced the results of a review of nine clinical studies evaluating Caldolor.
The comprehensive review was published in the journal Clinical Therapeutics and involved 1,062 adult patients,
with 757 receiving Caldolor and 305 receiving placebo or a comparator medication. The data noted that the use of
Caldolor improved post-surgery recovery, decreased surgical stress, and reduced the use of opioids and over-the-
counter medication. The study determined that patients given Caldolor experienced less postoperative pain and
decreased opioid use. Study authors also concluded that the rapid administration and preemptive use of Caldolor
should be considered in Enhanced Recovery After Surgery protocols for the management of postoperative pain
including that of traumatic origin.

Caldolor Newborn Study

We previously received FDA approval for the use of Caldolor in pediatric patients six months of age and
older. Caldolor is the first and only injectable NSAID approved for use in children. We then initiated a study to
collect data on the use of Caldolor in children ranging in age from birth up to six months of age. Enrollment in that
multi-center study was completed in 2019, and topline results were announced in 2020, indicating that Caldolor was
well tolerated in this patient population, with no safety concerns noted.

Renal Colic Study

During 2021, we report results from a clinical trial studying the comparison of intravenous ibuprofen with
injectable ketorolac in renal colic pain management demonstrated that ibuprofen is the more rapid-acting drug in
controlling pain caused by kidney stones. The study also indicated that the complete relief from pain with ibuprofen
was twice as much as that of ketorolac. The findings build upon a body of medical evidence supporting the use of
our Caldolor product for the treatment of patient pain.

Hyponatremia Publication

During 2021 we also reported on The Health Outcome Predictive Evaluation (“HOPE”) COVID-19 Registry
Analysis. It was an international study of over 4,000 patients published in November 2020, found that patients
hospitalized with COVID-19 had a high risk of developing hyponatremia. These COVID-19 patients also had a
higher incidence of mortality due to their hyponatremia. The study results support the use of an intravenous vaptan
to treat hyponatremia in critically ill patients afflicted with COVID-19.

Hyponatremia, an imbalance of serum sodium to body water, is the most common electrolyte disorder among
hospitalized patients. Our Vaprisol product is one of two branded prescription products indicated for the treatment of
hyponatremia, and the only intravenously administered branded treatment. Vaprisol has a proven day-1 response rate
to normalize serum sodium levels in hyponatremic patients and move them out of the Intensive Care Unit as
efficiently as possible.

Ifetroban Phase II Studies

We have been evaluating our ifetroban product candidate in a series of clinical studies. We have three Phase II
clinical programs underway evaluating our ifetroban product candidates in 1) Aspirin-Exacerbated Respiratory
Disease, a severe form of asthma, 2) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder
characterized by diffuse fibrosis of the skin and internal organs and 3) patients with cardiomyopathy associated with
Duchenne Muscular Dystrophy, a rare, fatal, genetic neuromuscular disease results in deterioration of the skeletal,
heart and lung muscles. Investigational New Study applications have been cleared by the FDA enabling us to launch
clinical studies in each of these areas.

We have also completed two pilot Phase II studies involving 1) patients suffering from Hepatorenal Syndrome,
a life-threatening condition involving liver and kidney failure and 2) patients with Portal Hypertension associated
with chronic liver disease. There were no significant safety issues identified with the use of ifetroban in these
patients.

Additional pilot studies of ifetroban are underway, including several investigator-initiated trials.

Enrollment in our clinical studies was interrupted during 2021 and 2020 due to the COVID-19 pandemic. Many
of our clinical study sites have reopened and resumed screening of patients for potential enrollment into our studies.
We are awaiting results from the studies underway before deciding on the best development path for the registration
of ifetroban, our first new chemical entity.

New Hospital Product Candidate Study

Cumberland was responsible for the formulation, development and FDA approval of both Acetadote and
Caldolor. Our Medical Advisory Board has helped us identify additional opportunities that address unmet or poorly
met medical needs. As a result, Cumberland has successfully designed, formulated and completed preclinical studies
for a cholesterol reducing agent for use in the hospital setting.

We previously completed a Phase I study which defined the pharmacokinetic properties and provided a
favorable safety profile for this new product candidate. The study results and a proposed clinical development plan
were discussed with the FDA.

A Phase II study has been initiated and patient enrollment completed. We have completed the study report,

filed it with the FDA and are now determining the next steps for this product development program.

Additional Testing Program

Cumberland entered into a non-clinical evaluation agreement, to test one of our products against bacterial
strains utilizing the preclinical services program funded by the Division of Microbiology and Infectious Diseases
(“DMID”), part of the National Institute of Allergy and Infectious Diseases (“NIAID”), an institute of the National
Institutes of Health (“NIH”), which is part of the Department of Health and Human Services (“HHS”), an agency of
the U.S. Government.

CORPORATE DEVELOPMENT

Cumberland Foundation

We have formed the Cumberland Pharma Foundation (the “Foundation”) to provide the ongoing philanthropic

endeavors of Cumberland Pharmaceuticals Inc.

The Foundation was formed as an independent, nonprofit corporation designed to qualify as a tax-exempt
organization pursuant to Section 501(a) of the Internal Revenue Code. The Foundation’s Board of Directors is
comprised of Cumberland Pharmaceuticals executives who are responsible for overseeing the Foundation’s ongoing
activities including charitable contributions.

We initially provided a grant of 50,000 shares of our common stock to the Foundation. The shares will address
the ongoing financial needs of the Foundation, with most of the shares expected to be held for the opportunity to
realize long term appreciation to support the Foundation’s future.

The Foundation maintains independent financial statements and its contributions will not impact the financial
statements of Cumberland Pharmaceuticals. Initial annual grants by the Foundation have been and remain consistent
with the historic level of contributions made by Cumberland Pharmaceuticals. During 2021, we provided
approximately $25,000 in cash contributions to the Foundation.

Cumberland Health and Wellness Political Action Committee

We have also formed the Cumberland Health and Wellness Political Action Committee (the “PAC”). The
objective of the PAC is to support candidates and policies that are consistent with Cumberland’s mission of
advancing patient care. The PAC’s activities will be at the local, state and federal level and conducted in a bi-
partisan manner.

The initial committee membership is comprised of Cumberland Pharmaceuticals employees. The PAC received
initial funding from us, and future funding will include voluntary individual contributions from Cumberland
Pharmaceuticals directors and employees.

MANUFACTURING AND DISTRIBUTION

Manufacturing

We partner with third parties for certain non-core, capital-intensive capabilities, including the manufacturing
and distribution of our products. We manage these third-party relationships and are responsible for the quality
review and release of each lot of our products.

Acetadote®

We have an agreement with one manufacturer, who provided commercial supplies of Acetadote in 2021.

Caldolor®

We have agreements with multiple manufacturers for the supply of Caldolor and during 2021 we obtained

commercial supplies from three of these manufacturers for our international and domestic Caldolor requirements.

Kristalose®

We have an agreement for the purchase of Kristalose API with an international supplier. We also had
manufacturing relationships with two packagers who provided finished supplies of the product for commercial and
sampling purposes during 2021. We will continue with one of those facilities in 2022.

Omeclamox-Pak®

During 2020, the packager for Cumberland’s Omeclamox-Pak product encountered financial difficulties due to
the economic impact of COVID-19, and their operations suspended. Cumberland is awaiting resumption of those
operations while also exploring other alternatives to restart the product’s packaging. We informed the FDA of a
shortage of the Omeclamox-Pak in October 2020, and have not provided a date for the availability of new inventory.

RediTrex®

In 2016, we entered into an agreement to acquire the exclusive U.S. rights to an injectable methotrexate product
line of pre-filled syringes. In 2019, we received FDA approval for the product line. Our licensor is responsible for
providing us the packaged and labeled commercial supply of the product.

Sancuso®

As part of the acquisition of Sancuso, we obtained an initial supply of finished goods inventory. The agreement
with the manufacturer of Sancuso was assigned to us and there are additional lots planned for 2022 which will
provide us with additional supplies. The production is in the process of being moved to one of the manufacturer’s
other facilities. Data is being developed to support the transfer which will require FDA approval.

Vaprisol®

As part of the acquisition of Vaprisol, we obtained a significant existing supply of raw material inventory. We
reached an agreement during 2020 with a new manufacturer to provide us with long - term supplies of the product.
We subsequently completed the transfer of the product’s manufacturing to the new facility in 2021. We informed the
FDA that supplies of the product are not currently available and are awaiting approval for that new facility.

Vibativ®

Through our acquisition of Vibativ, we obtained a multi-year supply of raw material, work in process and
finished goods inventory. As a result of the agreement, we are now responsible for the future manufacture of the
product and completed the transfer of the product’s manufacturing activities to a new supplier and received FDA
approval for that facility.

Distribution

Like many pharmaceutical companies, we engage a third-party with appropriate facilities and logistical
expertise to support the U.S. distribution of our products. In 2021, Cardinal Health Specialty Solutions has
exclusively handled our U.S. product logistics activities, including warehousing, shipping, and various other
customer activities. Our primary customers are the wholesalers of pharmaceuticals who provide our products to
hospitals, clinics and retail pharmacies in the U.S.

PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPRIETARY RIGHTS

We own the trademarks for each of our branded pharmaceutical products as well as for our corporate name and
logo. We have applied for trademark registration for other various names and logos. Over time, we intend to
maintain registrations on trademarks that remain valuable to our business.

We seek to protect our products from competition through a combination of patents, trademarks, trade secrets,
FDA exclusivity and contractual restrictions on disclosure. Proprietary rights, including patents, are an important
element of our business. We seek to protect our proprietary information by requiring our employees, consultants,
contractors and other advisors to execute agreements providing for protection of our confidential information upon
commencement of their employment or engagement. We also require confidentiality agreements from entities to
which we provide our confidential information or materials.

Acetadote®

We developed a new formulation of Acetadote (acetylcysteine) Injection as part of a Phase IV commitment in
response to a request by the FDA to evaluate the reduction of ethylene diamine tetraacetic acid ("EDTA") from the
product's formulation. In April 2012, the USPTO issued U.S. Patent number 8,148,356 (the “356 Acetadote
Patent”) which is assigned to us. The claims of the 356 Acetadote Patent encompass the new Acetadote formulation
and include composition of matter claims. Following its issuance, the 356 Acetadote Patent was listed in the FDA
Orange Book. The 356 Acetadote Patent is scheduled to expire in May 2026, which time period includes a 270-day
patent term adjustment granted by the USPTO.

Following the issuance of the 356 Acetadote Patent, we received separate Paragraph IV certification notices
from InnoPharma, Inc. ("InnoPharma"), Paddock Laboratories, LLC (“Paddock”), Mylan Institutional LLC
(“Mylan”), Sagent Agila LLC ("Sagent") and Perrigo Company ("Perrigo") challenging the 356 Acetadote Patent on
the basis of non-infringement and/or invalidity. We responded by filing five separate infringement lawsuits, in the
appropriate United States District Courts, to contest each of the challenges.

On November 12, 2012, we entered into a Settlement Agreement (the “Settlement Agreement”) with Paddock

and Perrigo to resolve the challenges and the pending litigation with those two companies.

On November 1, 2013, the United States District Courts filed opinions granting Sagent’s and InnoPharma’s
motions to dismiss our suits and we agreed not to file an appeal or motion to reconsider, thereby resolving the
challenges and the pending litigation with those two companies.

Under the Settlement Agreement, Paddock and Perrigo admit that the 356 Acetadote Patent is valid and
enforceable and that any Paddock or Perrigo generic version of Acetadote (with or without EDTA) would infringe
upon the 356 Acetadote Patent. In addition, Paddock and Perrigo will not challenge the validity, enforceability,
ownership or patentability of the 356 Acetadote Patent through its expiration currently scheduled for May 2026. On
November 12, 2012, in connection with the execution of the Settlement Agreement, we entered into a License and
Supply Agreement with Paddock and Perrigo (the “License and Supply Agreement”).

Under the terms of the License and Supply Agreement, if a third party receives final approval from the FDA for
an ANDA to sell a generic Acetadote product and such third party made such generic version available for purchase
in commercial quantities in the United States, we are to supply Perrigo with an Authorized Generic version of our
Acetadote product.

On May 18, 2012, we also submitted a Citizen Petition to the FDA requesting that the FDA refrain from
approving any applications for acetylcysteine injection that contain EDTA, based in part on the FDA's request that
we evaluate the reduction or removal of EDTA from our original Acetadote formulation.

On November 7, 2012, the FDA responded to the Citizen Petition denying our request and on November 8,
2012, we learned that the FDA approved the ANDA referencing Acetadote filed by InnoPharma, Inc. We brought
suit against the FDA contesting the FDA's decision to approve the InnoPharma generic on November 13, 2012.

On September 30, 2013, the United States District Court filed an opinion granting a summary judgment in favor

of the FDA regarding this suit.

As noted above, during 2012 the FDA approved the ANDA referencing Acetadote filed by InnoPharma, Inc.
Upon this condition, in accordance with the License and Supply agreement with Perrigo, we began to supply Perrigo
with our Authorized Generic. On January 7, 2013, Perrigo announced initial distribution of our Authorized Generic
acetylcysteine injection product.

On March 19, 2013, the USPTO issued U.S. Patent number 8,399,445 (the “445 Acetadote Patent”) which is
assigned to us. The claims of the 445 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation
to treat patients with acetaminophen overdose. On April 8, 2013, the 445 Acetadote Patent was listed in the FDA
Orange Book. The 445 Acetadote Patent is scheduled to expire in August 2025. Following the issuance of the 445
Acetadote Patent we received separate Paragraph IV certification notices from Perrigo, Sagent Pharmaceuticals, Inc.,
and Mylan challenging the 445 Acetadote Patent on the basis of non-infringement, unenforceability and/or
invalidity.

On June 10, 2013, we became aware of a Paragraph IV certification notice from Akorn, Inc. challenging the 445
Acetadote Patent and the 356 Acetadote Patent on the basis of non-infringement. On July 12, 2013, we filed a
lawsuit for infringement of the 356 Acetadote Patent against Akorn, Inc. in United States District Court.

On February 18, 2014, the USPTO issued U.S. Patent number 8,653,061 (the “061 Acetadote Patent”) which is
assigned to us. The claims of the 061 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation
to treat patients with acetaminophen overdose. Following its issuance, the 061 Acetadote Patent was listed in the
FDA Orange Book. The 061 Acetadote Patent is scheduled to expire in August 2025.

On May 13, 2014, the USPTO issued U.S. Patent number 8,722,738 (the “738 Acetadote Patent”) which is
assigned to us. The claims of the 738 Acetadote Patent encompass administration methods of acetylcysteine
injection, without specification of the presence or lack of EDTA in the injection. Following its issuance, the 738
Acetadote Patent was listed in the FDA Orange Book and it is scheduled to expire in April 2032.

On December 11, 2014 and March 3, 2015, we became aware of Paragraph IV certification notices from
Aurobindo Pharma Limited and Zydus Pharmaceuticals (USA) Inc., respectively, challenging the 356, 445, 061, and
738 Acetadote Patents on the basis of non-infringement.

On February 10, 2015, the USPTO issued U.S. Patent number 8,952,065 (the “065 Acetadote Patent”) which is
assigned to us. The claims of the 065 Acetadote Patent encompass the use of the 200 mg/ml Acetadote formulation
to treat patients with acute liver failure. The 065 Acetadote Patent is scheduled to expire in August 2025.

On September 30, 2015, the United States District Court for the Northern District of Illinois, Eastern Division
("District Court") ruled in our favor in our lawsuit against Mylan for infringement of the 445 Acetadote Patent. The
opinion upheld our 445 Acetadote Patent and expressly rejected Mylan's validity challenge. The District Court
ruled that Mylan is liable to us for infringement of the 445 Acetadote patent in light of Mylan's Abbreviated New
Drug Application in which Mylan sought to market a generic version of Acetadote.

On November 17, 2015, the District Court entered an order enjoining Mylan and its affiliates from selling or
using its generic version of Acetadote until August 2025, the date of expiration of the 445 Acetadote Patent. On
October 30, 2015, Mylan filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit (the "Appeals
Court").

On May 3, 2016, the USPTO issued U.S. Patent number 9,327,028 (the “028 Acetadote Patent”) which is
assigned to us. The claims of the 028 Acetadote Patent encompass administration methods of acetylcysteine
injection, without specification of the presence or lack of EDTA in the injection. Following its issuance, the 028
Acetadote Patent was listed in the FDA Orange Book and it is scheduled to expire in July 2031.

On January 26, 2017, the Appeals Court affirmed the District Court ruling in our favor in our lawsuit against
Mylan for infringement of the 445 Acetadote Patent. The Appeals Court opinion affirmed the District Court’s ruling
upholding our 445 Acetadote Patent and expressly rejected Mylan's validity challenge.

On November 3, 2017, we became aware of a Paragraph IV certification notice from Exela Pharma Sciences,

LLC challenging the 356, 445, 061, 738, and 028 Acetadote Patents on the basis of non-infringement.

Caldolor®

We have an exclusive, worldwide license to clinical data for intravenous ibuprofen from Vanderbilt University,
in consideration for royalty obligations related to Caldolor. During 2014, we obtained additional patents for the
brand. On May 27, 2014, the USPTO issued U.S. Patent number 8,735,452 (the “452 Caldolor Patent”) which is
assigned to us. The claims of the 452 Caldolor Patent encompass methods of treating pain using intravenous
ibuprofen. Following its issuance, the 452 Caldolor Patent was listed in the FDA Orange Book and is scheduled to
expire in September 2029.

On October 28, 2014, the USPTO issued U.S. Patent number 8,871,810 (the “810 Caldolor Patent”) which is
assigned to us. The claims of the 810 Caldolor Patent encompass methods of treating pain using intravenous
ibuprofen. Following its issuance, the 810 Caldolor Patent was listed in the FDA Orange Book and is scheduled to
expire in September 2029.

During the third quarter of 2015, we obtained four additional patents for Caldolor. On July 7, 2015, the USPTO
issued U.S. Patent number’s 9,072,710 (the “710 Caldolor Patent”) and 9,072,661 (the “661 Caldolor Patent”) which
are assigned to us. The claims of the 710 Caldolor Patent and the 661 Caldolor Patent include composition and
methods of treating pain, inflammation and fever using intravenous ibuprofen. These Caldolor Patents are listed in
the FDA Orange Book and are scheduled to expire in March 2032. On April 21, 2015, the USPTO issued U.S.
Patent No. 9,012,508 (the “508 Caldolor Patent”) which is assigned to us.

The claims of the 508 Caldolor Patent include methods of treating pain using intravenous ibuprofen. Following
its issuance, the 508 Caldolor Patent was listed in the FDA Orange Book and is scheduled to expire in September
2030. On August 25, 2015, the USPTO issued U.S. Patent number 9,114,068 (the “068 Caldolor Patent”) which is
assigned to us. The claims of the 068 Caldolor Patent include methods of treating pain using intravenous ibuprofen.

Following its issuance, the 068 Caldolor Patent was listed in the FDA Orange Book and is scheduled to expire
in September 2029. On September 22, 2015, the USPTO issued U.S. Patent number 9,138,404 (the “404 Caldolor
Patent”) which is assigned to us.

The claims of the 404 Caldolor Patent include methods of treating pain in critically ill patients with intravenous
ibuprofen. Following its issuance, the 404 Caldolor Patent was listed in the FDA Orange Book and is scheduled to
expire in September 2029.

On March 29, 2016, the USPTO issued U.S. Patent number 9,295,639 (the "639 Caldolor Patent") which is
assigned to us. The claims of the 639 Caldolor Patent include methods of treating pain in critically ill patients with
intravenous ibuprofen. Following its issuance, the 639 Caldolor Patent was listed in the FDA Orange Book and is
scheduled to expire in September 2029.

On May 16, 2017, the USPTO issued U.S. Patent number 9,649,284 (the "284 Caldolor Patent") which is
assigned to us. The claims of the 284 Caldolor Patent include methods of treating pain in critically ill patients with
intravenous ibuprofen. Following its issuance, the 284 Caldolor Patent was listed in the FDA Orange Book and is
scheduled to expire in September 2029. We also have additional patent applications related to Caldolor which are
pending with the USPTO.

Vibativ®

We own numerous U.S. patents and related international patents for Vibativ. These patents were acquired in our
November 2018 acquisition of certain product rights, intellectual property and related assets of Vibativ from
Theravance. Three Vibativ patents are listed in the FDA Orange Book. U.S. Patent number 7,531,623 (the “623
Vibativ Patent”) is scheduled to expire in January 2027 and includes composition of matter claims that encompass
the Vibativ drug substance as well as methods for preparing the Vibativ drug substance.

Sancuso®

We are the owner of U.S. Patent number 7,608,282 (the “282 Sancuso Patent”) for Sancuso. This patent was
acquired in our December 2021 acquisition, that closed in January 2022, of certain product rights, intellectual
property and related assets of Sancuso from Kyowa Kirin, Inc. The 282 Sancuso Patent is listed in the FDA Orange
Book and is scheduled to expire in January 2025. The 282 Sancuso Patent includes composition of matter claims
that encompass the Sancuso drug product as well as methods of using Sancuso for treatment and/or prophylaxis.

Remaining Products

We have no issued patents for our Vaprisol, RediTrex, Omeclamox-Pak and Kristalose products. We have

multiple granted patents relating to our ifetroban products and patent applications pending with the USPTO.

COMPETITION

The pharmaceutical industry is characterized by intense competition and rapid innovation. Our continued
success in developing and commercializing pharmaceutical products will depend, in part, upon our ability to
compete against existing and future products in our target markets. Competitive factors directly affecting our
markets include but are not limited to:

•

product attributes such as efficacy, safety, ease-of-use and cost-effectiveness;

brand awareness and recognition driven by sales, marketing and distribution capabilities;

intellectual property and other exclusivity rights;

availability of resources to build and maintain developmental and commercial capabilities;

successful business development activities;

extent of third-party reimbursements, insurance coverage; and

establishment of advantageous collaborations to conduct development, manufacturing or commercialization
efforts.

A number of our competitors possess research and development and sales and marketing capabilities as well as
financial resources greater than ours. These competitors, in addition to emerging companies and academic research
institutions, may be developing, or in the future could develop, new technologies that could compete with our
current and future products or render our products obsolete.

Our products face competition from other branded products, generics, and alternate medical treatments. Our
task is to position each brand to feature its competitive advantages, implement a well thought out marketing plan and
provide focused sales and other tactical support.

Acetadote®

Acetadote is our injectable formulation of N-acetylcysteine ("NAC") for the treatment of acetaminophen
overdose. NAC is accepted worldwide as the standard of care for acetaminophen overdose. Our competitors in the
acetaminophen overdose market are those companies selling orally administered NAC including, but not limited to,
Geneva Pharmaceuticals, Inc., Bedford Laboratories division of Hikma Pharmaceuticals, Roxane Laboratories, Inc.,
InnoPharma Inc. and Hospira Inc.

In November 2012, InnoPharma Inc. was granted approval by the FDA to distribute their generic form of the
old formulation of Acetadote containing EDTA. In late 2012, we entered into the Settlement Agreement with
Paddock and Perrigo that included the right to distribute our Authorized Generic Acetadote injection product. Our
branded Acetadote now competes with both the EDTA free Authorized Generic Acetadote distributed by Paddock
and Perrigo along with generic Acetadote products that contain EDTA.

Manufactures of the old Acetadote formulation include: Akorn, AuroMedics Pharma, Fresenius Kabi and

Sagent Pharmaceuticals.

Caldolor®

Caldolor is marketed for the treatment of pain and fever, primarily in a hospital or surgery center setting. A

variety of other products address the acute pain market:

• Morphine, the most commonly used product for the treatment of acute, post-operative pain, is

manufactured and distributed by several generic pharmaceutical companies;

•

Other generic injectable opioids, including fentanyl, meperidine and hydromorphone, address this
market;

•

Ketorolac tromethamine (brand name Toradol®), an injectable NSAID, is also manufactured and
distributed by several generic pharmaceutical companies;

IV acetaminophen (brand name Ofirmev®), an injectable analgesic product is sold by Mallinckrodt plc,
and there are also generic versions from different manufacturers available;

Bupivacaine injectable suspension (brand name Exparel®), product sold by Pacira Pharmaceuticals,
Inc., two additional bupivacaine products, Xaracoll and Posimir, were recently approved; and

IV meloxicam (brand name Anjeso™), a once a day injectable COX-2 preferential NSAID
manufactured by Baudax Bio which was recently approved by the FDA.

We are aware of other product candidates in development to treat acute pain including injectable NSAIDs,
novel opioids, new formulations of existing therapies and extended release anesthetics. We believe non-narcotic
analgesics for the treatment of post-surgical pain are the primary potential competitors to Caldolor.

In addition to the injectable analgesic products above, many companies are developing analgesics for specific
indications such as migraine and neuropathic pain, oral extended-release forms of existing narcotic and non-narcotic
products, as well as those with new methods of delivery such as transdermal. We are not aware of any approved
injectable products indicated for the treatment of fever in the U.S. other than Caldolor and Ofirmev.

There are, however, numerous drugs available to physicians to reduce fevers in hospital settings via oral
administration to the patient, including ibuprofen, acetaminophen, and aspirin. These drugs are manufactured by
numerous pharmaceutical companies.

Kristalose®

Kristalose is a dry powder crystalline prescription formulation of lactulose indicated for the treatment of
constipation. The U.S. constipation therapy market includes various prescription and over the counter, or OTC,
products. The branded prescription products which we believe are our primary competitors are:

•

Lubiproston (brand name Amitiza®), an oral product indicated for the treatment of chronic idiopathic
constipation, irritable bowel syndrome with constipation in adults, is manufactured and sold by
Mallinckrodt Pharmaceuticals.

• Naloxegol (brand name Movantik®), an oral product indicated for the treatment of opioid-induced
constipation in adults with chronic non-cancer pain and recently acquired by RedHill Biopharma in the first
quarter of 2020.

•

Linaclotide (brand name Linzess®), an oral product indicated for the treatment of irritable bowel syndrome
with constipation and chronic idiopathic constipation. It is sold by Allergan, Inc. and Ironwood
Pharmaceuticals, Inc.

Plecanatide (brand name Trulance®), an oral product indicated for the treatment of irritable bowel
syndrome with constipation and chronic idiopathic constipation. It is sold by Synergy Pharmaceuticals.

• Generic and branded liquid lactulose products are marketed by a number of pharmaceutical companies.

•

Lactitol for oral solution (brand name Pizensy), an oral, osmotic laxative indicated for the treatment of
chronic idiopathic constipation and distributed by Braintree Laboratories, Inc. was recently approved by
the FDA.

There are several hundred OTC products used to treat constipation marketed by numerous pharmaceutical and
consumer health companies. MiraLax (polyethylene glycol 3350), previously a prescription product, was indicated
for the treatment of constipation and manufactured and marketed by Bayer. MiraLax was converted to an OTC
product in February 2007 and recently, the FDA rescinded the approval of the generic prescription polyethylene
glycol 3350 products.

Omeclamox®-Pak

Omeclamox-Pak is a branded prescription product used for the treatment of Helicobacter pylori (H. pylori)
infection and duodenal ulcer disease. It combines three well-known and widely prescribed medications packaged in
a daily dose pack for patient convenience: omeprazole, clarithromycin, and amoxicillin. The three individual
components of Omeclamox-Pak are also available from other suppliers through three separate prescriptions.

While there are several competitor products, Omeclamox-Pak is one of the two actively marketed products for
this condition. In addition, compared to the competing products, Omeclamox-Pak has the lowest pill burden, fewest
days of therapy and convenient twice daily dosing. The prescription combination products, indicated for treatment of
H. pylori, which we believe are our primary competitors are:

•

PrevPac®, an oral product sold by Takeda Pharmaceutical Company. There are also approved generic
versions of PrevPac;

Pylera®, an oral product manufactured and sold by Allergan plc; and

Talicia®, an oral product manufactured by RedHill Biopharma which was recently approved by the FDA.

RediTrex®

RediTrex is methotrexate for subcutaneous administration in a unique syringe designed for ease of use,
improved accuracy, and enhanced safety. It is indicated for treatment of rheumatoid arthritis, polyarticular juvenile
idiopathic arthritis, and severe, recalcitrant, or disabling psoriasis unresponsive to alternative treatments.

This market is highly competitive with drugs from several different therapeutic classes available for treatment.
Methotrexate is considered a standard of care especially when patients fail to respond adequately to low dose
steroids or non-steroidal anti-inflammatory drugs (NSAIDs). Methotrexate is available in multiple dose forms
including oral, subcutaneous, and intra-venous. Methotrexate may be used alone or in combination with drugs from
other therapeutic classes to adequately control patient symptoms.

RediTrex competes with other dose forms and delivery systems for methotrexate including, oral tablets,
conventional vial and syringe administration, and auto-injector pens. Oral tablets and conventional vials are generic
and available from many suppliers. There are two auto-injector pen products available, Rasuvo and Otrexup.

RediTrex also competes with or may be used in combination with drugs from other therapeutic classes
including, injectable biologics like Humira and Enbrel and oral JAK inhibitors like Xaljanz. These newer agents are
more expensive than the methotrexate products but benefit from significant promotion to patients and doctors.

Sancuso®

Sancuso is the only transdermal patch FDA approved for the management of chemotherapy induced nausea and
vomiting (CINV). Each patch delivers up to 5 days of treatment with granisetron, a standard of care for CINV,
through the skin. Recommended treatment suggests the patch be applied 24 to 48 hours prior to chemotherapy
treatment and remain in place for 5 days.

While there are no other transdermal products available to treat CINV, there are a large number of generic
and branded oral products as well as a limited number of injectables. Cumberland considers the oral branded
products to be the most important competition including Akynzeo, Emend Oral, Varubi, Zuplenz, and Kytril.

Vaprisol®

Vaprisol is a patented, prescription brand indicated to raise serum sodium levels in hospitalized patients with
euvolemic and hypervolemic hyponatremia. The product was developed and registered by Astellas and then
launched in 2006. It is one of two branded prescription products indicated for the treatment of hyponatremia, and the
first and only intravenously administered branded treatment. The other competing product is Samsca, an oral
product sold by Otsuka Pharmaceutical Company.

Vibativ®

Vibativ is a potent, once-daily, injectable antibiotic for the treatment of certain gram-positive infections. Vibativ
is approved for the treatment of complicated skin and skin structure infections and hospital-acquired or ventilator-
associated bacterial pneumonia caused by susceptible isolates of Staphylococcus aureus when alternative treatments
are not suitable. There are several generic and branded antibiotics that compete for these indications.

The major generic competitors are vancomycin, linezolid, and daptomycin. Vancomycin is by far the most

widely used agent. Newer branded agents are also available including:

•

Ceftaroline fosamil (brand name Teflaro® ) an injectable antibiotic manufactured and sold by Allergan

• Dalbavancin (brand name Dalvance® ), an injectable antibiotic manufactured and sold by Allergan

• Oritavancin (brand name Orbactiv® ), an injectable antibiotic manufactured and sold by Melinta

We are aware of a number of other novel antibiotics which are currently in development.

Antibiotic drug selection is based both on an empiric and susceptibility proven basis. In the hospital setting, cost
is an important factor which favors the use of generic agents as long as they are effective. Newer agents are often
reserved for two reasons: they are valuable in the treatment of patients that fail to respond to generics and it is
considered good practice to conserve the use of these agents to reduce the risk of resistance.

GOVERNMENT REGULATION

The development of new pharmaceutical products can be a long, expensive and risky process. There is no
assurance we will obtain successful study results or secure the needed market approvals for our pipeline product
candidates. Governmental authorities in the U.S. and other countries extensively regulate the research, development,
testing, manufacturing, distribution, marketing and sale of pharmaceutical products. For more information, see
"Risks Relating to Government Regulation" in Part I, Item 1A of this Form 10K.

In the U.S., the FDA under the Federal Food, Drug, and Cosmetic Act, ("FDCA"), the Public Health Service
Act, and other federal statutes and regulations, subjects pharmaceutical products to rigorous review. Failure to
comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial
sanctions, such as FDA refusal to approve pending New Drug Application ("NDAs") or biologics license
applications, ("BLAs"), warning letters, product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, fines, civil penalties, and criminal prosecution.

We, our manufacturers and contract research organizations may also be subject to regulations under other
federal, state and local laws, including the Occupational Safety and Health Act, (OSHA), the Resource Conservation
and Recovery Act, the Clean Air Act and import, export and customs regulations as well as the laws and regulations
of other countries.

FDA Approval Process

The FDA is a regulatory agency within the Department of Health and Human Services. A key responsibility is
to regulate the safety and effectiveness of drugs sold in the United States. The FDA manages this responsibility into
two phases: pre-approval (premarket) and post approval (post market). The FDA reviews manufacturers'
applications to market drugs in the United States; a drug may not be sold unless it has FDA approval. The FDA
continues its oversight of drug safety and effectiveness as long as the drug is on the market.

To market a prescription drug in the United States, a manufacturer needs FDA approval. To get that approval,
the manufacturer must demonstrate the drug's safety and effectiveness according to criteria specified in law and
agency regulations, ensure that its manufacturing plant passes FDA inspection, and obtain FDA approval for the
drug's labeling, a term that includes all written material about the drug, including, for example, packaging,
prescribing information for physicians and patient brochures.

The progression to drug approval begins before FDA involvement. First, scientists work in the laboratory to
discover and develop a new compound. Next, basic questions on safety are answered by nonclinical testing with
animals and then, a drug or biotechnology company develops a prototype drug. That company must seek clearance
from the FDA by way of an Investigational New Drug ("IND") application to test the product with human subjects.

Those tests, called clinical trials, are carried out sequentially in Phase I, II, and III studies, which involve
increasing numbers of subjects. The manufacturer then compiles the resulting data and analyses in an NDA. The
FDA reviews the NDA with three major concerns: (1) safety and effectiveness in the drug's proposed use; (2)
appropriateness of the proposed labeling; and (3) adequacy of manufacturing methods to assure the drug's identity,
strength, quality, and purity.

The FDA and associated regulations detail the requirements at each step. The FDA uses a few special
mechanisms to expedite drug development and the review process when a drug might address an unmet need or a
serious disease or condition. Those mechanisms include accelerated approval, fast track and priority reviews and the
newer designation, breakthrough therapy.

The sponsor of the drug typically conducts human clinical trials in three sequential phases, but the phases may
overlap. Phase I clinical trials are generally conducted in a small number of healthy volunteers, primarily to collect
and assess pharmacokinetics and safety data at one or more dosages prior to proceeding into patients.

In Phase II clinical trials, the sponsor evaluates the early efficacy of the product in short term trials on the

targeted indication and identifies possible adverse effects and safety risks in a patient population.

Phase III clinical trials typically involve testing for patients in long term trials examining safety and clinical

efficacy in an expanded population at geographically-dispersed test sites.

The FDA requires that clinical trials be conducted in accordance with the FDA's Good Clinical Practice GCP
requirements. The FDA may order the partial, temporary or permanent discontinuation of a clinical trial at any time
or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA
requirements or presents an unacceptable risk to the clinical trial patients. The institutional review board ("IRB"), or
ethics committee (outside of the U.S.), of each clinical site generally must approve the clinical trial design and
patient informed consent and may also require the clinical trial at that site to be halted, either temporarily or
permanently, for failure to comply with the IRB's requirements, or may impose other conditions.

The results of the nonclinical and clinical trials, together with detailed information on the manufacturing and
composition of the product and proposed labeling, are submitted to the FDA in the form of an NDA for marketing
approval. The NDA undergoes a 60-day validation review period before it is accepted for filing.

If the NDA is found to be incomplete, it will not be accepted. Once the NDA is validated and accepted for

filing, the FDA begins an in-depth review of the NDA.

Under policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA (currently PDUFA
VI - effective October 1, 2017), the FDA has a target timeline of 10 months in which to complete its initial review of
a standard NDA and respond to the applicant. The review process and the PDUFA goal date may be extended by
two months to address deficiencies, or by three months if the FDA requests or the NDA sponsor otherwise provides
additional information or clarification regarding information already provided in the submission at any time during
the review clock period. If the FDA's evaluations of the NDA and the clinical and manufacturing procedures and
facilities are favorable and meet all regulations, the FDA will issue an approval letter. Priority review is reserved for
drugs that represent a “significant improvement in safety or efficacy” over existing treatments and FDA endeavors
to complete these reviews in six months.

If the NDA meets with FDA approval, a letter will be sent out indicating approval and final labeling
recommendations. If not, a complete response letter will be sent to applicants indicating that the review cycle for an
application is complete and that the application is not ready for approval.

The complete response letter will describe the specific deficiencies that the agency has identified in an
application and what changes must be made before the application can be approved, with no implication regarding
whether the application will ultimately be approved. An approval letter authorizes commercial marketing of the
drug for the proposed indication(s) under study. While the FDA's PDUFA 2021 Performance Report showed a
continued increase in the percentage of first-cycle approval letters for new molecular entities rising from 56% for
FY 2009 to preliminary reports of 100% for FY 2021, we cannot be certain that timely first-cycle approvals will be
maintained by the FDA.

The time and cost of completing these steps and obtaining FDA approval can vary dramatically depending on

the drug. However, to complete these steps for a novel drug can take many years and cost millions of dollars.

Section 505(b) New Drug Applications

An NDA may be submitted under different methods, a 505(b)(1), 505(b)(2) or 505(j). Section 505(b) provides
for the submission of an NDA to support the approval of a drug. Upon approval, a drug may be marketed only for
the FDA-approved indication(s) in the approved dosage form. Further clinical trials may be necessary to gain
approval for the use of the product for any additional indications or dosage forms.

The FDA also requires post market safety surveillance reporting to monitor the side effects of the drug, which

may result in withdrawal of approval after marketing begins if significant adverse safety findings are found.

Section 505(b)(1) or the 'full' NDA is used for new chemical entities ("NCEs") and requires full clinical and
nonclinical development of a compound. Marketing exclusivity assigned to a 505(b)(1) approval is five years. A
505(b)(2) NDA permits the submission of an NDA where at least some of the information required for approval
comes from studies not conducted by or for the applicant using previously reported safety and efficacy data, and for
which the applicant has not obtained a right of reference. Generally new studies are required to provide data on the
proposed change.

Some examples of products that may be allowed to follow a 505(b)(2) path to approval are drugs which have a
new dosage form, strength, route of administration, formulation or indication or combination drugs. Marketing
exclusivity for a 505(b)(2) submission is three years.

Both 505 (b)(1) and (b)(2) are eligible for seven years of exclusivity for orphan drugs and/or six months for
pediatric exclusivity. Any marketing exclusivity is independent of patent exclusivity. We successfully secured FDA
approvals for Acetadote in January 2004, for Caldolor in June 2009 and for RediTrex in 2019 pursuant to the
505(b)(2) pathway.

Orphan drug designation

The Orphan Drug Act of 1983 (the "Orphan Drug Act") encourages manufacturers to seek approval of products
intended to treat “rare diseases and conditions” with a prevalence of fewer than 200,000 patients in the U.S. or for
which there is no reasonable expectation of recovering the development costs for the product. For products that
receive orphan drug designation by the FDA, the Orphan Drug Act provides tax credits for clinical research, FDA
assistance with protocol design, eligibility for FDA grants to fund clinical studies, waiver of the FDA application
fee, and a period of seven years of marketing exclusivity for the product following FDA marketing approval.

Acetadote received Orphan Drug designation in October 2001 and in 2004 the FDA approved the product to
prevent or lessen hepatic injury after ingestion of a potentially hepatotoxic quantity of acetaminophen. Acetadote
was entitled to marketing exclusivity until January 2011 for the treatment of this approved indication.

Section 505(j) abbreviated new drug applications

An ANDA is a type of NDA where approval of a generic drug is based on demonstrating comparability to an
innovator drug product (the RLD or Reference Listed Drug). Applications are "abbreviated" because they generally
don't include preclinical and clinical data to establish safety and effectiveness. Generics must demonstrate that the
product is bioequivalent (i.e., performs in the same manner and is comparable to the 'innovator' product in active
ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics and intended
use).

Abbreviated applications may be submitted for drug products that are the same as a listed drug and must be
identical in active ingredient(s), form, strength, route of administration, and identical in conditions of use (non-
exclusive uses). Products are declared suitable based on a suitability petition to the FDA. If the petition is approved,
the Sponsor may then submit the ANDA.

The Hatch-Waxman Act

The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act",

is a 1984 United States federal law which established the modern system of generic drugs.

Hatch-Waxman amended the Federal Food, Drug, and Cosmetic Act. Section 505(j) 21 U.S.C. 355(j) sets forth
the process by which would-be marketers of generic drugs can file ANDAs to seek FDA approval of the generic.
Section 505(j)(2)(A)(vii)(IV), the so-called Paragraph IV, allows 180-day exclusivity to companies that are the
"first-to-file" an ANDA against holders of patents for branded counterparts.

These Hatch-Waxman amendments grant generic manufacturers the ability to mount a validity challenge
without incurring the cost of entry or risking enormous damages flowing from any possible infringement. Hatch-
Waxman essentially redistributes the relative risk assessments and explains the flow of settlement funds and their
magnitude. Hatch-Waxman gives generics considerable leverage in patent litigation.

Health care legislation

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or
PPACA. On March 30, 2010, the Health Care and Education Reconciliation Act of 2010, or HCERA, was enacted
into law, which modified the revenue provisions of the PPACA. The PPACA as amended by the HCERA constitutes
the healthcare reform legislation. The following highlights certain provisions of the legislation that may affect us.

Pharmaceutical Industry Fee: Beginning in calendar-year 2011, an annual fee was imposed on pharmaceutical
manufacturers and importers that sell branded prescription drugs to specified government programs (e.g., Medicare
Part D, Medicare Part B, Medicaid, Department of Veterans Affairs programs, Department of Defense programs and
TRICARE).

The annual fee is allocated to companies based on their previous calendar-year market share using sales data
that the government agencies that purchase the pharmaceuticals will provide to the Treasury Department. Although
we participate in governmental programs that subject us to this fee, our sales volume in such programs is less than
$10 million, with the first $5 million of sales being exempt from the fee. This fee has not had a material impact and
is not expected to have a material impact on our results of operations.

In addition, PDUFA imposes annual program fees. An applicant will be assessed annual prescription drug
program fees for prescription drug products, incurring a fee for each strength of a drug product. An applicant may
not be assessed more than five prescription drug program fees for a fiscal year for prescription drug products
identified in a single approved application.

Physician Payments Sunshine Act: The PPACA also includes provisions known as the Physician Payments
Sunshine Act, or Sunshine Act, which require manufacturers of pharmaceuticals and medical devices covered under
Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data
to the Centers for Medicare and Medicaid Services, or CMS, for aggregation and subsequent public disclosure.
Under the Sunshine Act, beginning August 1, 2013, we have collected data regarding reportable transfers of value
and have reported such data to CMS. Failure to report appropriate data may result in civil or criminal fines and/or

penalties. In addition to the Federal Sunshine Act, similar reporting requirements have also been enacted on the
state level requiring transparency of interactions with health care professionals.

Medicaid Rebate Rate: Under the Medicaid Drig Rebate probram we currently are required to provide rebates
for covered outpatient drugs that are dispensed to Medicaid beneficiaries. In addition, we also are required to
participate in the Public Health Service's 340B drug pricing program, which requires us to agree to charge no more
than a designated ceiling price for covered outpatient drugs that are dispensed to community health clinics and other
entities that receive health services grants from the Public Health Service, as well as hospitals that serve a
disproportionate share of low-income patients.

Product Serialization: In November of 2013, the FDA passed the Drug Supply Chain Security Act (DSCSA).
The DSCSA was created to strengthen the security of the drug distribution supply chain by adding controls such as a
national pharmaceutical track and trace system and establishing national standards for licensing of prescription drug
wholesale distributors and
including
manufacturers, repackagers, wholesale distributors and dispensers to provide transaction information to subsequent
purchasers for certain prescription drugs. We have taken necessary steps to implement this program and are in
compliance with all requirements by the November 2018 deadline.

logistics providers. DSCSA requires

trading partners,

third-party

21st Century Cures Act: The 21st Century Cures Act (Cures Act), signed into law on December 13, 2016, is
designed to help accelerate medical product development and bring new innovations and advances to patients who
need them faster and more efficiently. The law builds on FDA's ongoing work to incorporate the perspectives of
patients into the development of drugs, biological products, and devices in FDA's decision-making process. The
Cures Act enhances FDA's ability to modernize clinical trial designs and clinical outcome assessments, which will
speed the development and review of novel medical products, including medical countermeasures.

Specifically, the Cures Act enables us to work with FDA in the development of new biomarkers, clinical
outcome assessments, surrogate endpoints, and patient reported outcomes. It allows for the use of data summaries
rather than full clinical trials for approval and the use of real world evidence to support approval of new indications
of approved medical products, or to help satisfy post-approval study requirements for marketed products.

Build Back Better Act and Other Proposed Legislation: The Build Back Better Act ("BBBA") was introduced
in the 117th Congress and included provisions that were intended to lower the price of prescription drugs, including
granting the Medicare program the authority to negotiate prescription drug prices and imposing tax penalties on drug
manufacturers if the price of drugs increase too rapidly. Ultimately the BBBA was not enacted, however, future
legislative initiatives are likely to include provisions targeted at containing costs in the presccription drug market.

Post Approval Activities

Once a drug is on the U.S. market (following FDA approval of the NDA), the FDA continues to address drug
production, distribution, and use. FDA activities are based on ensuring drug safety and effectiveness, and address
product integrity, labeling, reporting of research and adverse events, surveillance, drug studies, risk management,
information dissemination, off-label use, physician advertising and direct-to-consumer advertising.

If we amend the NDA for an FDA approved product, such as adding safety or efficacy labeling claims,
promoting those new claims, making certain manufacturing changes or product enhancements, we will need FDA
review and approval before the change can be implemented. While physicians may use products for indications that
have not been approved by the FDA, we may not label or promote the product for an indication that has not been
approved.

Securing FDA approval for new indications, product enhancements, and manufacturing and labeling changes
may require us to conduct additional clinical trials under FDA's IND regulations. Even if such studies are conducted,
they are still subject to the same requirements and timelines as an original NDA.

The FDA continuously gathers information about possible adverse reactions to the products it has approved for
use. The FDA requires all manufacturers to report adverse events. It also provides a procedure for consumers and
physicians to voluntarily report their concerns about drugs. The agency collects those reports through MedWatch
and uses its FDA Adverse Event Reporting System (FAERS) to store and analyze them. Because some events may

occur after the use of a drug for reasons unrelated to the product, the FDA reviews the events to assess which ones
may indicate a problem with that particular drug.

They then use information gleaned from the surveillance data to determine a course of action. They might
recommend a change in drug labeling to alert users to a potential problem, or, perhaps, to require the manufacturer
to study the observed association between the drug and the adverse event.

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal
laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These
laws include anti-kickback statutes and false claims statutes.

The federal health care program anti-kickback statute prohibits, among other things, knowingly and willfully
offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or
arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid
or other federally financed health care programs. This statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other.
Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and
exclusion from participation in federal health care programs.

In addition to these U.S. laws, we are subject to similar laws that govern our marketing practices and financial
arrangements with heath care providers and otherwise are intended to prohibit illicit kickbacks and bribery,
including the Foreign Corrupt Practices Act.

Federal False Claims Act

The Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a
false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to
have a false claim paid.

A number of pharmaceutical and other health care companies have been prosecuted under these laws for
allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set
Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the
expectation that the customers would bill federal programs for the product.

HIPAA and Other Data Protection Laws

In the United States, we and our collaborators are subject to numerous federal and state privacy and security
laws and regulations, including the Health Insurance Portability and Accountability Act of 1996. These laws
include obligations related to protecting the privacy and security of health-related personal information, including
information that we may obtain through the clinical trial process. In addition, similar laws and regulations exist in
Europe and other jurisdictions, including the European Union's General Data Protection Regulation.

ICH - International Committee on Harmonization

Outside of the U.S., our ability to market our products will depend on receiving marketing authorizations from
the appropriate regulatory authorities. The International Committee on Harmonization (ICH) provides a set of
standards that most Regulatory Authorities adhere to (e.g. U.S., Europe, and Japan) allowing greater harmonization
in the interpretation and application of technical guidelines and requirements for pharmaceutical product
registration, thereby reducing or obviating duplication of testing carried out during the research and development of
new human medicines. Regulatory harmonization offers many direct benefits to both regulatory authorities and the
pharmaceutical industry with beneficial impact for the protection of public health.

ENVIRONMENTAL MATTERS

We are subject to federal, state and local environmental laws and regulations and we believe that our operations
comply with such regulations. We anticipate that the effects of compliance with federal, state and local laws and
regulations relating to the discharge of materials into the environment will not have any material effect on our
capital expenditures, earnings or competitive position.

SEASONALITY

There are no significant seasonal aspects to our business.

BACKLOG

Due to the relatively short lead-time required to fill orders for our products, backlog of orders is not considered

material to our business.

EMPLOYEES

As of December 31, 2021, we had 83 employees. We believe that our future will depend in part on our
continued ability to attract, hire, and retain qualified personnel, including hospital and field sales personnel in
particular. To that end, we work with qualified search firms to identify talent, we measure and adjust compensation
levels to remain competitive and we work closely with team members to support their success.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this Annual Report on Form 10-K that are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statement of historical facts may be forward-looking statements. In
particular, forward-looking statements include, among other things, statements regarding our intent, belief or
expectations, and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,”
“plan,” “estimate,” “should,” “seek,” “anticipate” and other comparable terms or the negative thereof. In addition,
we, through our senior management, from time to time make forward-looking oral and written public statements
concerning our expected future operations and other developments. While forward-looking statements reflect our
good-faith beliefs and best judgment based upon current information, they are not guarantees of future performance
and are subject to known and unknown risks and uncertainties, including those mentioned in Item 1A, “Risk
Factors,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
elsewhere in this Form 10-K. Accordingly, investors are cautioned not to place undue reliance on any forward-
looking statements. Actual results may differ materially from the expectations contained in the forward-looking
statements as a result of various factors. Such factors include, but are not limited to:

•

The possible or assumed future results of operations, including the accuracy of our estimates regarding
expenses, future revenues, capital requirements and needs for additional financing;

Changes in national or regional economic conditions, including changes in interest rates and the
availability and the cost of capital to us;

The extent of the impact of the novel coronavirus (COVID-19) pandemic, including the duration and
any recurrence of the COVID-19 pandemic, the duration and scope of related government orders and
restrictions, the impact on our employees, and the extent of the impact of the COVID-19 pandemic on
overall demand for our key products;

The impact of the COVID-19 pandemic on our suppliers, including any disruptions and inefficiencies
in the supply chain for our products;

Our competitive position and competitors, including the size and growth potential of the markets for
our products and product candidates;

The success, cost and timing of our product acquisition and development activities and clinical trials;
and our ability to successfully commercialize our product candidates;

Product efficacy or safety concerns, whether or not based on scientific evidence, resulting in product
withdrawals, recalls, regulatory action on the part of the FDA (or international counterparts) or
declining sales;

The performance of our third-party suppliers and manufacturers which impacts our supply chain and
could create business shutdowns or product shortages; and the retention of key scientific and
management personnel;

Challenges to our patents and the introduction of generic versions of our products and product
candidates, which could negatively impact our ability to commercialize and sell our products and
product candidates and decrease sales a result of market exclusivity;

Changes in reimbursement available to us, including changes in Medicare and Medicaid payment
levels and availability of third-party insurance coverage and the effects of future legislation or
regulations, including changes to regulatory approval of new products, licensing and patent rights,
environmental protection and possible drug re-importation legislation;

Interruptions and breaches of our computer and communications systems, and those of our vendors,
including computer viruses, hacking and cyber-attacks, that could impair our ability to conduct
business and communicate internally and with our customers, or result in the theft of trade secrets or

other misappropriation of assets, or otherwise compromise privacy of sensitive information belonging
to us, our customers or other business partners; and

•

Issuance of new or revised accounting standards by the Financial Accounting Standards Board and the
Securities and Exchange Commission.

The list above contains many, but not all, of the factors that could impact our ability to achieve results
described in any forward-looking statements. Investors should understand that it is not possible to predict or identify
all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.
For more information about the risks, uncertainties, and other factors that could affect our future results, please refer
to Item 1A, Risk Factors, included herein.

Item 1A. Risk Factors.

Risk Factor Summary

Investing in our common stock involves a high degree of risk. You should carefully consider all information in
this Annual Report on Form 10-K prior to investing in our common stock. These risks are discussed more fully in
the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following:

•

General economic conditions can have a material adverse effect on our business, financial conditions and
result of operations.

The ongoing COVID-19 pandemic may adversely affect our revenues, results of operations and financial
condition.

Failure to implement strategies to enhance our performance could have a material adverse effect on our
business, results of operations and financial conditions.

Our ability to perform depends on keeping and hiring exceptionally talented management and employees,
and our failure to do so could have a material adverse effect on our business, revenues, results of operations
and financial condition.

Our success depends, in part, on our ability to successfully obtain or retain high-performing third-party
performers on commercially acceptable terms, and the failure to do so can have a material adverse effect on
our business, financial conditions and results of operations.

Our business is subject to stringent government regulations, it must adhere to numerous complex pieces of
legislation, and all of our products face regulatory challenges.

Our business depends on the successful protection of our intellectual property rights and our product
candidates becoming approved by regulatory agencies, commercially viable, and accepted by the market.

Our business faces a serious financial risk if generic products that compete with any of our branded
pharmaceutical products are approved and sold because sales of our products will be adversely-affected and
our business may not recover the capital costs of bringing that product to market.

Our business faces an inherent risk of product liability lawsuits related to the testing of our product
candidates and the commercial sale of our products, and if we cannot successfully defend ourselves against
the product liability claim, we may incur substantial liabilities.

• We may attempt to develop internationally and license our products globally, as well as invest in other
businesses or joint ventures, all of which may be unsuccessful, divert our management’s attention and harm
our operating results and prospects.

The risk factors described below and throughout this report should be carefully considered and could materially
affect our business. There are also risks that are not presently known or not presently material, as well as the other
information set forth in this report that could materially affect our business. In addition, in our periodic filings with
the SEC, press releases and other statements, we discuss estimates and projections regarding our future performance
and business outlook. By their nature, such “forward-looking statements” involve known and unknown risks,
uncertainties and other factors that in some cases are out of our control. For a further discussion of forward-looking
statements, please refer to the section entitled “Special Note Regarding Forward-Looking Statements.” These factors
could cause our actual results to differ materially from our historical results or our present expectations and
projections. These risk factors and uncertainties include, but are not limited to the following:

RISKS RELATED TO OUR BUSINESS

Risks Related to the COVID-19 pandemic, natural disasters, public health epidemics, and other events beyond
our control.

Our business has been adversely impacted by the COVID-19 pandemic which has affected more than 200
countries and has significantly disrupted the day-to-day activities of both individuals and companies. We rely on
individuals and third-party organizations around the world to supply components, manufacture and distribute our
products, and execute our clinical trials. We have and may continue to experience revenue loss, supply interruptions,
time delays and incur unplanned expenses as a result of the impact of the ongoing COVID-19 pandemic.

The COVID-19 pandemic’s impact on global markets could affect our future access to liquidity and materially
adversely affect our results of operations and financial condition.

The ongoing COVID-19 pandemic, and restrictions intended to prevent its spread, have had a significant
adverse impact on economic and market conditions around the world, including the United States. The impact of the
COVID-19 pandemic continues to evolve. While the economic impact brought by, and the duration of, COVID-19 is
difficult to assess or predict, the COVID-19 pandemic could result in additional disruption of global financial
markets, reducing our ability to access capital in the future, which could negatively affect our liquidity in the future
and in ways that cannot be predicted potentially including a prolonged recessionary environment in the United
States. In the longer term, there could be significant new regulatory actions and other events that could limit our
activities and investment opportunities or change the functioning of the capital markets, and there is the possibility
of a severe worldwide economic downturn. Consequently, we may not be capable of, or successful at, generating
positive investment returns or effectively managing risks. Accordingly, we cannot predict the extent to which our
results of operations, financial condition and cash flows will be affected.

An adverse development regarding our products could have a material and adverse impact on our future
revenues and profitability.

Our product portfolio currently includes eight brands: Acetadote, Caldolor, Kristalose, Vaprisol, Omeclamox-
Pak, Vibativ, RediTrex and Sancuso. A product contamination or other safety or regulatory issues, such as a failure
to meet certain FDA reporting requirements involving our products, could negatively impact us and possibly lead to
a product recall. In addition, changes impacting any of our products in areas such as competition, lack of market
acceptance or demand, government regulation, intellectual property, reimbursement and manufacturing could have
an adverse impact on our future revenues and profitability including:

•

Changes in intellectual property protection available for our products or competing treatments;

Any unfavorable publicity concerning us, our products, or the markets for these products such as
information concerning product contamination or other safety issues in any of our product markets,
whether or not directly involving our products;

Perception by physicians and other members of the healthcare community of the safety or efficacy of
our products or competing products;

Regulatory developments related to our marketing and promotional practices or the manufacture or
continued use of our products;

The prices of our products relative to other drugs or competing treatments;

The impact of current or additional generic competitors;

The availability and level of third-party reimbursement for sales of our products;

The continued availability of adequate supplies of our products to meet demand:

• Weakened demand for our products; and

• Unforeseen or serious adverse effects outside of those specified in current product labeling being

attributed to any of our approved products.

Acetadote may be used to treat acetaminophen overdosess. The FDA has previously requested prescribers and
manufacturers of prescription combination products that contain acetaminophen to limit the amount of
acetaminophen to no more than 325 milligrams (mg) in each tablet or capsule. The FDA requested this action to
protect consumers from the risk of severe liver damage which can result from excess acetaminophen which may
reduce the number of acetaminophen overdoses which could result in a lower demand for Acetadote. If the demand
for Acetadote decreases, it could have an adverse impact on our future revenues and profitability.

The commercial success of Caldolor is dependent on many third-parties, including physicians, pharmacists,
hospital pharmacy and therapeutics committees, or P&T committees, suppliers and distributors, all of whom we
have little or no control over. We expect Caldolor to continue to be administered primarily to hospital and surgery
center patients who are unable to receive oral therapies for the treatment of pain or fever. Before we can distribute
Caldolor to any new hospital customers, Caldolor must be approved for addition to the hospitals’ formulary lists by
their P&T committees. A hospital’s P&T committee generally governs all matters pertaining to the use of
medications within the institution, including review of medication formulary data and recommendations of drugs to
the medical staff. We cannot guarantee that we will be successful in getting the approvals we need from enough
P&T committees to be able to optimize hospital sales of Caldolor. Even if we obtain hospital approval for Caldolor,
we must still convince individual hospital physicians to prescribe Caldolor repeatedly. The commercial success of
Caldolor also depends on our ability to coordinate supply, distribution, marketing, sales and education efforts. As
with our other products, if Caldolor is not accepted in the marketplace, it could have an adverse impact on our future
revenues and profitability.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns
could hinder their ability to review and approve new products and otherwise affect the FDA’s ability to perform
routine functions. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs or
modifications to approved drugs to be reviewed and/or approved by necessary government agencies, which would
adversely affect our business.

Separately, in response to the continuing COVID-19 pandemic and the spread of the Omicron variant, on
December 29, 2021, the FDA announced its intention to again postpone surveillance inspections of most foreign and
domestic manufacturing facilities with no definitive target date for resuming routine inspection activities. Regulatory
authorities outside the United States may adopt similar restrictions or other policy measures in response to the
COVID-19 pandemic and emerging variants. If a prolonged government shutdown occurs, or if global health
concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections,
reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory
authorities to timely review and process our regulatory submissions, which could have a material adverse effect on
our business.

If any manufacturer or partner we rely upon fails to supply our products in the amounts we require on a timely
basis, or fails to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may be
unable to meet demand for our products and may lose potential revenues.

We do not manufacture any of our products, and we do not currently plan to develop any capacity to do so. Our
dependence upon third parties for the manufacture of our products could adversely affect our profit margins or our
ability to develop and deliver products on a timely and competitive basis. If for any reason we are unable to obtain
or retain third-party manufacturers on commercially acceptable terms, we may not be able to sell our products as
planned. Furthermore, if we encounter delays or difficulties with contract manufacturers in producing our products,
the distribution, marketing and subsequent sales of these products could be adversely affected. A long-term inability
to meet demand for our products could result in impairment of our brands overall future and the carrying value of
the assets associated with our brands. The recent COVID-19 pandemic has and may continue to create issues for our
third party-manufacturers and introduce delays in our manufacturing process.

Acetadote: We have an agreement with one manufacturer to provide commercial supply of Acetadote. If this
manufacturer is unable to produce marketable inventory in sufficient quantities, in the agreed upon time period, we
could suffer an inability to meet demand for Acetadote.

Caldolor: We have agreements with multiple manufacturers for the supply of Caldolor and during 2021 we
obtained commercial supplies from three of these manufacturers for our international and domestic Caldolor
requirements. If the manufacturers of Caldolor are unable to produce marketable inventory in sufficient quantities, in
the agreed upon time period, we could suffer an inability to meet demand for Caldolor.

Kristalose: The active pharmaceutical ingredient for Kristalose is manufactured at a single facility through a
complex process. It would be particularly difficult to find a new manufacturer of the Kristalose active
pharmaceutical ingredient on an expedited basis. We also have manufacturing relationships with two packagers who
provided finished supplies of Kristalose for commercial and sampling purposes during 2021. We will be continuing
the packaging of Kristalose with one of those packagers going forward. If the manufacturing or packaging facilities
are unable to produce useable or marketable inventory in sufficient quantities, in the agreed upon time period, we
could suffer an inablty to meet demand for Kristalose.

Omeclamox-Pak: Our packager for Omeclamox-Pak encountered financial difficulties due to the impact of
COVID-19, and their operations are currently suspended. Cumberland is awaiting resumption of those operations
while also exploring other alternatives to restart the product’s packaging. In October 2020, we informed the FDA of
a shortage of the Omeclamox-Pak which continues. If we are unable to obtain marketable inventory in the future, we
could suffer an inability to meet demand for Omeclamox-Pak.

Vaprisol: In 2018, the manufacturer of Vaprisol informed us that they would no longer be able to provide the
product following the manufacturing of one final batch which is providing us with a multi-year supply. We are
currently working with a new manufacturer to provide us with long term supplies of the product. In February 2022,
we notified the FDA of a shortage of Vaprisol If we are unable to produce additional marketable inventory in
sufficient quantities, in the required time frame, we could suffer an inability to meet demand for Vaprisol.

Vibativ: Through our acquisition of Vibativ, we acquired a multi-year supply of raw material, work in process
and finished goods inventory. In 2020, we completed the transfer of Vibativ manufacturing activities to a new
supplier. If we are unable to continue to obtain marketable inventory in sufficient quantities, in the agreed upon time
period, we could suffer an inability to meet demand for Vibativ.

RediTrex: Under our licensing and distribution agreement for the product, our licensor is responsible for
providing us the packaged and labeled commercial supply of the RediTrex product. If we are unable to obtain
marketable inventory in sufficient quantities, in the agreed upon time period, we could suffer an inability to meet
demand for RediTrex.

Sancuso: As part of the acquisition of Sancuso in January 2022, we obtained an initial supply of finished goods
inventory and work in progress. The continued production of Sancuso is in the process of being moved to one of the
current manufacturer’s other facilities. Data is being developed to support the transfer which will require FDA
approval. If the FDA does not approve the new facility and we are unable to obtain marketable inventory n sufficient
quantities, we could suffer an inability to meet demand for Sancuso.

In addition, all manufacturers of our products and product candidates must comply with current good
manufacturing practices, ("GMPs"), enforced by the FDA through its facilities inspection program. These
requirements include quality control, quality assurance, and the maintenance of records and documentation.
Manufacturers of our products must be unable to comply with GMP requirements and with other FDA, state, and
foreign regulatory requirements.

We have no control over our manufacturers’ compliance with these regulations and standards. If our third-party
manufacturers do not comply with these requirements, we could be subject to Fines and civil penalties; suspension
of production or distribution; suspension or delay in product approval; product seizure or recall; and withdrawal of
product approval.

We are dependent on a variety of other third parties. If these third parties fail to perform as we expect, our
operations could be disrupted and our financial results could suffer.

We have a relatively small internal infrastructure. We rely on a variety of third parties, in addition to our
manufacturers, to help us operate our business. If these third parties do not continue to provide services to us, or
collaborate with us, we might not be able to obtain others who can serve these functions. This could disrupt our
business operations, increase our operating expenses or otherwise adversely affect our operating results.

Competitive pressures could reduce our revenues and profits.

The pharmaceutical industry is intensely competitive. Our strategy is to target differentiated products in
specialized markets. However, this strategy does not relieve us from competitive pressures and can entail distinct
competitive risks. Certain of our competitors do not aggressively promote their products in our markets. An increase
in promotional activity in our markets could result in large shifts in market share, adversely impacting us.

Our competitors may sell or develop drugs that are more effective and useful or less costly than ours, and they
may be more successful in manufacturing and marketing their products. Many of our competitors have significantly
greater financial and marketing resources than we do. Additional competitors may enter our markets.

The pharmaceutical industry is characterized by constant and significant investment in new product
development, which can result in rapid technological change. The introduction of new products could substantially
reduce our market share or render our products obsolete. The selling prices of pharmaceutical products tend to
decline as competition increases, through new product introduction or otherwise, which could reduce our revenues
and profitability.

If generic products that compete with any of our branded pharmaceutical products are approved and sold, sales
of our products will be adversely affected.

Generic equivalents for branded pharmaceutical products are typically sold at lower costs than the branded
products. The regulatory approval process in the United States exempts generic products from costly and time-
consuming clinical trials to demonstrate their safety and efficacy and rely instead on the safety and efficacy of prior
products, manufacturers of generic products can invest far less in research and development. After the introduction
of a competing generic product, a significant percentage of the prescriptions previously written for the branded
product are often written for the generic version. In addition, legislation enacted in most U.S. states allows or, in
some instances mandates, that a pharmacist dispense an available generic equivalent when filling a prescription for a
branded product, in the absence of specific instructions from the prescribing physician. Governmental and private
healthcare payors also emphasize substitution of branded pharmaceuticals with less expensive generic equivalents.
Pursuant to the provisions of the Hatch-Waxman Act, manufacturers of branded products often bring lawsuits to
enforce their patent rights against generic products released prior to the expiration of branded products’ patents, but
it is possible for generic manufacturers to offer generic products while such litigation is pending. As a result,
branded products typically experience a significant loss in revenues following the introduction of a competing
generic product, even if subject to an existing patent. Our branded pharmaceutical products are or may become
subject to competition from generic equivalents because there is no proprietary protection for some of the branded
pharmaceutical products we sell, because our patent protection expires or because our patent protection is not
sufficiently broad or enforceable. In addition, we may not be successful in our efforts to extend the proprietary
protection afforded our branded products through the development and commercialization of proprietary product
improvements. Competition from generic equivalents could result in a decrease in revenues of our branded
pharmaceuticals or result in a material impairment of our intangible assets or the acceleration of amortization on our
non-impaired intangible assets and may have a material adverse impact on our revenues, financial condition, results
of operations and cash flows.

Any attempt by us to expand the potential market for any of our products is subject to limitations.

Expansion of the market for our products may be subject to certain limitations. In the past, these limitations
have included FDA required Phase IV commitments. We may also experience delays associated with future required
Phase IV clinical studies potentially resulting from, among other factors, difficulty enrolling patients. Such delays

could impact our ability to explore opportunities for label expansion and limit our ability to bring our products to
new patient populations.

In addition, we have largely obtained regulatory approval to market our products in the United States. Not all
foreign jurisdictions may represent attractive opportunities for our products due to pricing, competitive, regulatory
or other factors. In certain foreign jurisdictions, we have licensed the right to market some of our products to third
parties. These third parties are responsible for seeking and maintaining regulatory approval for the products in their
respective jurisdictions. We have no control over these third parties and cannot be sure that marketing approval for
our products will be obtained outside the United States.

Our future growth depends on our ability to identify and acquire rights to products. If we do not successfully
identify and acquire rights to products, our growth opportunities may be limited.

We have added six products to our portfolio of brands through acquisitions. Our business strategy is to continue
to acquire rights to FDA-approved products as well as pharmaceutical product candidates in the late stages of
development. We do not plan to conduct basic research or preclinical product development, except to the extent of
our investment in CET. As compared to large multi-national pharmaceutical companies, we have limited resources
to acquire third-party products, businesses and technologies and integrate them into our current infrastructure. Many
acquisition opportunities involve competition among several potential purchasers including large multi-national
pharmaceutical companies and other competitors that have access to greater financial resources than we do. With
future acquisitions, we may face financial and operational risks and uncertainties. We may not be able to engage in
future product acquisitions, and those we do complete may not be beneficial to us in the long term.

Furthermore, other products in development may encounter unforeseen issues during their clinical trials. Any
unforeseen issues or lack of FDA approval will negatively affect marketing and development plans for those
products.

Our future growth depends on our ability to successfully integrate acquired product brands into our operations.
If we do not successfully integrate acquired product brands into our operations, our growth opportunities may be
limited.

If we are unable to successfully integrate the marketing, sale and distribution of any other potential products
into our current infrastructure or if they require significantly greater resources than originally anticipated, we may
face financial and operational risks and uncertainties. If we are unable to successfully integrate any acquired brands,
both current and future, these product acquisitions may not be beneficial to us in the long term.

Our ifetoban product candidates have not been approved for sale and may never be successfully commercialized.

We anticipate that a portion of our future revenue growth may come from sales of our ifetroban product
candidates. However, none of these products have been approved by the FDA for marketing, and these product
candidates are still subject to risks associated with their development. Drug development is a long, expensive and
inherently uncertain process with a high risk of failure at every stage of development, and results of earlier studies
and trials may not be predictive of future trial results

The FDA has cleared our IND's for the ifetroban product candidates as we evaluate them as treatments for these
conditions. Delays in the enrollment and completion of the clinical studies could significantly delay commercial
launch and affect our product development costs. Moreover, results from the clinical studies may not be favorable.

Even if they are eventually developed and approved by the FDA, they may never gain significant acceptance in
the marketplace and therefore never generate substantial revenue or profits for us. Physicians may determine that
existing drugs are adequate to address patients' needs. The extent to which these product candidates will be
reimbursed by the U.S. government or third-party payors is also currently unknown.

As a result of the foregoing and other factors, we do not know the extent to which our product candidates will

contribute to our future growth.

If we are unable to maintain, train and build an effective sales and marketing infrastructure, we will not be able
to commercialize and grow our products and product candidates successfully.

As we grow, we may not be able to secure sales personnel or organizations that are adequate in number or
expertise to successfully market and sell our products. This risk would be accentuated if we acquire products in
areas outside of our current focus areas since our sales forces specialize in our existing areas. If we are unable to
expand our sales and marketing capability, train our sales force effectively or provide any other capabilities
necessary to commercialize our products and product candidates, we will need to contract with third parties to
market and sell our products. We must train our employees on proper regulatory compliance, including, but not
limited to, “fair balance” promotion of our products and anti-kickback laws. If we are unable to establish and
maintain compliant and adequate sales and marketing capabilities, we may not be able to increase our product
revenue, may generate increased expenses and may experience regulatory compliance issues.

If governmental or third-party payors do not provide adequate reimbursement for our products, our revenue and
prospects for profitability may be limited.

Our financial success depends, in part, on the availability of adequate reimbursement from third-party
healthcare payors. Such third-party payors include governmental health programs such as Medicare and Medicaid,
managed care providers and private health insurers. Third-party payors are increasingly challenging the pricing of
medical products and services, while governments continue to propose and pass legislation designed to reduce the
cost of healthcare. Adoption of such legislation could further limit reimbursement for pharmaceuticals. In addition,
as part of the Build Back Better Act (“BBBA”) proposed legislation, provisions intended to lower the price of
prescription drugs, including permitting Medicare to negotiate the price of prescription drugs once they have been
on the market for a fixed number of years, and imposing a tax penalty on drug manufacturers if the price of their
drugs increase faster than the rate of inflation are possible At this time no assurances can be given that these
measures, or subsequent legislative proposals, will not have an adverse effect on our revenues in the future. Future
cost control initiatives, legislation, and regulations could decrease the price that we receive for our products, which
would limit our revenue and profitability.

Also, reimbursement practices of third-party payors might preclude us from achieving market acceptance for
our products or maintaining price levels sufficient to realize an appropriate return on our investment in product
acquisition and development. If we cannot obtain adequate reimbursement levels, our business, financial condition
and results of operations would be materially and adversely affected.

Our employees have been trained to submit accurate and correct pricing information to payors. If, despite the
training, our employees provide incorrect or fraudulent information, then we will be subject to various
administrative and judicial investigations and litigation.

“Formulary” practices of third-party payors could adversely affect our competitive position.

Many managed healthcare organizations control the pharmaceutical products included on their formulary lists.
Having products listed on these formulary lists creates competition among pharmaceutical companies which, in turn,
has created a trend of downward pricing pressure in our industry. In addition, many managed care organizations are
pursuing various ways to reduce pharmaceutical costs and are considering formulary contracts primarily with those
pharmaceutical companies that can offer a full line of products for a given therapy sector or disease state. Our
products might not be included on the formulary lists of managed care organizations, and downward pricing
pressure in our industry generally could negatively impact our operations.

Continued consolidation of distributor networks in the pharmaceutical industry as well as increases in retailer
concentration may limit our ability to profitably sell our products.

We sell most of our products to large pharmaceutical wholesalers, who in turn sell to hospitals, surgery centers
and retail pharmacies. The distribution network for pharmaceutical products has become increasingly consolidated
in recent years. Further consolidation or financial difficulties could also cause our customers to reduce the amounts
of our products that they purchase, adversely impacting our business, financial condition and results of operations.

Our CET joint initiative may not result in our gaining access to commercially viable products.

Our CET joint initiative with Vanderbilt University, WinHealth and Tennessee Technology Development
Corporation is designed to help us investigate, in a cost-effective manner, early-stage products and technologies.
However, we may never gain access to commercially viable products from CET for a variety of reasons, including:

•

CET investigates early-stage products, which have risk of failure prior to FDA approval and
commercialization;

In some programs, we do not have pre-set rights to product candidates developed by CET. We would
need to agree with CET and its collaborators on the terms of any product licensed or acquired by us;

• We rely principally on government grants to fund CET’s research and development programs. If these
grants were no longer available, we or our co-owners might be unable or unwilling to fund CET
operations at current levels or at all;

• We may become involved in disputes with our co-owners regarding CET policy or operations, such as
how best to deploy CET assets or which product opportunities to pursue. Disagreement could disrupt
or halt product development; and

•

CET may disagree with one of the various universities with which CET is collaborating on research. A
disagreement could disrupt or halt product development.

We depend on our key personnel, the loss of whom would adversely affect our operations. If we fail to attract and
retain the talent required for our business, our business will be materially harmed.

We are a relatively small company, and we depend to a great extent on principal members of our management,
scientific staff, and sales representatives and managers. If we lose the services of any key personnel, in particular,
A.J. Kazimi, our Chief Executive Officer, or other members of senior management it could have a material adverse
effect on our business prospects. Mr. Kazimi, plays a key role in several operational and strategic decisions such that
any loss of his services due to death or disability would adversely impact our day-to-day operations. We have a life
insurance policy covering the life of Mr. Kazimi. We have entered into agreements with each of our employees that
contain restrictive covenants relating to non-competition and non-solicitation of our customers and suppliers for one
year after termination of employment. Nevertheless, each of our officers and key employees may terminate his or
her employment at any time without notice and without cause or good reason, and so as a practical matter these
agreements do not guarantee the continued service of these employees. Our success depends on our ability to attract
and retain highly qualified scientific, technical, sales and managerial personnel and research partners. Competition
among pharmaceutical companies for qualified employees is intense, and we may not be able to retain existing
personnel or attract and retain qualified staff in the future. If we experience difficulties in hiring and retaining
personnel in key positions, we could suffer from delays in product development, loss of customers and sales and
diversion of management resources, which could adversely affect operating results. The recent COVID-19 pandemic
has introduced additional challenges in the retention and hiring of key personnel.

The size of our organization and our potential growth may lead to difficulties in managing operations.

As of December 31, 2021, we had 83 employees. We may need to continue to expand our managerial,
operational, financial and other resources in order to increase our marketing efforts with regard to our currently
marketed products, continue our business development and product development activities and commercialize our
product candidates. We have experienced, and may continue to experience, growth and increased expenses in the
scope of our operations in connection with the continued marketing and development of our products. Our financial
performance will depend, in part, on our ability to manage any such growth and expenses of the current organization
effectively.

We face potential product liability exposure, and if successful claims are brought against us, we may incur
substantial liability for a product or product candidate and may have to limit its commercialization.

We face an inherent risk of product liability lawsuits related to the testing of our product candidates and the
commercial sale of our products. An individual may bring a liability claim against us if one of our product
candidates or products causes, or appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we may incur substantial liabilities. Liability claims may result in decreased
demand for our products; injury to our reputation; withdrawal of clinical trial participants; significant litigation
costs; substantial monetary awards to or costly settlement with patients; product recalls; loss of revenue; and the
inability to commercialize our product candidates.

We have product liability insurance that covers our clinical trials, the marketing and sale of our products up to a
$10 million annual aggregate limit, subject to specified deductibles. Our current or future insurance coverage may
prove insufficient to cover any liability claims brought against us.

Because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a

reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise.

Regulatory approval for any approved product is limited by the FDA to those specific indications and

conditions for which clinical safety and efficacy have been demonstrated.

Any regulatory approval is limited to those specific diseases and indications for which a product is deemed to
be safe and effective by the FDA. In addition to the FDA approval required for new formulations, any new
indication for an approved product also requires FDA approval. If we are not able to obtain FDA approval for any
desired future indications for our products, our ability to effectively market and sell our products may be reduced
and our business may be adversely affected.

Our failure to follow FDA rules and guidelines relating to promotion and advertising may cause the FDA to
suspend or withdraw an approved product from the market, require a recall or payment of fines, or could result in
disgorgement of money, operating restrictions, injunctions or criminal prosecution, any of which could harm our
business.

Our business and operations would suffer in the event of system failures, security breaches, including any
cybersecurity incidents, adverse events or other disruptions within our information technology infrastructure at
our corporate headquarters; or in the event of intellectual property infringement.

Our business depends on effective, secure and operational information systems which include systems provided
by external contractors and other service providers. Despite the implementation of security measures, our computer
systems and information technology infrastructure, including those resources at our corporate headquarters, are
vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war
and telecommunication and electrical failures. Our business is at risk from and may be impacted by information
security incidents, including ransomware, malware, phishing, social engineering, and other security events. Such
incidents can range from individual attempts to gain unauthorized access to information technology systems to more
sophisticated security threats. These events can also result from internal compromises, such as human error or
malicious acts. These events can occur on our systems or on the systems of our partners and subcontractors.

In the ordinary course of our business, we store sensitive data, including intellectual property, our proprietary
business information and that of our customers. We also maintain personally identifiable information of our
employees in our data centers and on our networks. The secure processing and maintenance of this information is
critical to our operations. Problems with, or the failure of, our technology and systems or any system upgrades or
programming changes associated with such technology and systems would have a substantial and material negative
effect on our operations. Furthermore, any system failure, accident or security breach that causes interruptions in our
operations could result in a material disruption of our drug development programs.

While we continue to invest in data protection and information technology, our information technology and
infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other
disruptions. Any such breach could compromise our networks and the information stored there could be accessed,

publicly disclosed, lost or stolen. If we are subject to cyber-attacks or security breaches, this could result in business
interruptions and delays; the loss, misappropriation, corruption or unauthorized access of data; litigation and
potential liability under privacy, security and consumer protection laws or other applicable laws; reputational
damage and federal and state governmental inquiries. Any such problems or failures and the costs incurred in
correcting any such problems or failures, could have a material adverse effect on our business and financial
condition, results of operations and cash flows. To the extent that any disruption or security breach results in a loss
or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may
incur liability and the further development of our products or product candidates may be delayed. A failure to restore
our information systems after the occurrence of any of these events could have a material adverse effect on our
business and financial condition, results of operations and cash flows.

Our information systems and applications also require maintenance, upgrading and enhancement to meet our
operational needs. We regularly upgrade and expand our information systems’ capabilities. If we experience
difficulties with the transition and integration of information systems or are unable to implement, maintain, or
expand our systems properly, we could suffer from, among other things, operational disruptions, regulatory
problems and increases in administrative expenses.

As cyber threats continue to evolve, we may be required to expend significant capital and other resources to
protect against the threat of security breaches or to mitigate and alleviate problems caused by breaches, including
unauthorized access to proprietary information and personally identifiable information stored in our information
systems, and the introduction of computer viruses or other malicious software programs to our systems. Our security
measures may be inadequate to prevent security breaches and our business operations could be materially adversely
affected by federal and state fines and penalties, legal claims or proceedings, cancellation of contracts and loss of
customers if security breaches are not prevented.

We believe that our subcontractors and vendors take precautionary measures to prevent problems that could
affect our business operations as a result of failure or disruption to their information systems. However, there is no
guarantee such efforts will be successful in preventing a disruption, and it is possible that we may be impacted by
information system failures. The occurrence of any information system failures could result in interruptions, delays,
loss or corruption of data and cessations or interruptions in the availability of these systems. All of these events or
circumstances, among others, could have an adverse effect on our business, results of operations, financial position
and cash flows, and they could harm our business reputation.

We believe we have all the necessary licenses from third parties to use technology and software that we do not
own. A third party could, however, allege that we are infringing its rights, which may deter our ability to obtain
licenses on commercially reasonable terms from the third party, if at all, or cause the third party to commence
litigation against us. In addition, we may find it necessary to initiate litigation to protect our trade secrets, to enforce
our intellectual property rights and to determine the scope and validity of any proprietary rights of others. Any such
litigation, or the failure to obtain any necessary licenses or other rights, could materially and adversely affect our
business.

We license our products globally; therefore, we may have exposure to foreign regulatory requirements and
fluctuations in foreign currency exchange rates.

Continued foreign licensure inherently subjects us to a number of risks and uncertainties, including:

•

longer payment cycles and difficulties in enforcing agreements and collecting receivables through
certain foreign legal systems;

political and economic instability or sanctions in areas in which we operate;

potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other
trade barriers;

regulations related to customs and import/export matters (including sanctions);

tax issues, such as tax law changes and variations in tax laws;

•

challenges in collecting accounts receivable from customers in the jurisdictions in which we operate;

complying with laws, rules and regulations relating to the manufacturing, marketing, distribution and
sale of pharmaceutical products in the jurisdictions in which we do or will operate;

operating under regulations in jurisdictions related to obtaining eligibility for government or private
payor reimbursement for our products at the wholesale/retail level;

competition from local, regional and international competitors;

difficulties and costs of staffing and managing foreign operations, including cultural and language
differences and additional employment regulations, union workforce negotiations and potential
disputes in the jurisdictions in which we operate;

difficulties associated with compliance with a variety of laws and regulations governing international
trade, including the Foreign Corrupt Practices Act;

difficulties protecting or procuring intellectual property rights; and

fluctuations in foreign currency exchange rates.

Any of these factors may, individually or as a group, have a material adverse effect on our business and results
of operations. These or other similar risks could adversely affect our revenue and profitability. As we continue to
develop internationally, our exposure to these factors will increase.

We may decide not to commercialize one of our drug candidates once it obtains regulatory approval if we
determine that commercialization of that product would require more capital and time than we are willing to
invest.

Even if any of our drug candidates receives regulatory approval, it could be subject to matters such as post-
regulatory surveillance, additional clinical trials or testing, reformulation, changes in labeling, warnings to the
public, recall, competition from similar or superior products, and lack of sufficient payor reimbursement by
insurance companies or Medicare. As a result, we may not commercialize or continue to commercialize a product
that has obtained regulatory approval.

Any approved drug product that we bring to the market may not gain market acceptance by physicians, patients,
healthcare payors and others in the medical community.

Even if we are successful in gaining regulatory approval of any of our drug candidates or acquire rights to
approved drug products, we may not generate significant product revenues and we may not become profitable if
these drug products do not achieve an adequate level of acceptance. Physicians may not recommend our drug
products until longer-term clinical data or other factors demonstrate the safety and efficacy of our drug products as
compared to other alternative treatments. Even if the clinical safety and efficacy of our drug products is established,
physicians may elect not to prescribe these drug products for a variety of reasons, including the reimbursement
policies of government and other third-party payors and the effectiveness of our competitors in marketing their
products.

Market acceptance of our drug products, if approved for commercial sale, will depend on a number of factors,

including:

•

the willingness and ability of patients and the healthcare community to use our drug products;

the ability to manufacture our drug products in sufficient quantities with acceptable quality and to offer
our drug products for sale at competitive prices;

the perception of patients and the healthcare community, including third-party payors, regarding the
safety, efficacy and benefits of our drug products compared to those of competing products or
therapies;

•

the label and promotional claims allowed by the FDA; and

the pricing and reimbursement of our drug products relative to existing treatments.

We may acquire businesses or assets, form joint ventures or make investments in other companies that may be
unsuccessful, divert our management’s attention and harm our operating results and prospects.

As part of our business strategy, we may pursue additional acquisitions of what we believe to be complementary
businesses or assets or seek to enter into joint ventures. We also may pursue strategic alliances in an effort to
leverage our existing infrastructure and industry experience to expand our product offerings or distribution, or make
investments in other companies. The success of our acquisitions, joint ventures, strategic alliances and investments
will depend on our ability to identify, negotiate, complete and, in the case of acquisitions, integrate those
transactions and, if necessary, obtain satisfactory debt or equity financing to fund those transactions. We may not
realize the anticipated benefits of any acquisition, joint venture, strategic alliance or investment. We may not be able
to integrate acquisitions successfully into our existing business, maintain the key business relationships of
businesses we acquire, or retain key personnel of an acquired business, and we could assume unknown or contingent
liabilities or incur unanticipated expenses. Integration of acquired companies or businesses also may require
management resources that otherwise would be available for ongoing development of our existing business. Any
acquisitions or investments made by us also could result in significant write-offs or the incurrence of debt and
contingent liabilities, any of which could harm our operating results. In addition, if we choose to issue shares of our
stock as consideration for any acquisition, dilution to our shareholders could result.

The acquisitions we have made or make in the future may make us the subject of lawsuits from either an
acquired company’s shareholders, an acquired company’s previous shareholders, or our current shareholders.

We may be the subject of lawsuits from either an acquired company’s shareholders, an acquired company’s
previous shareholders, or our current shareholders. These lawsuits could result from the actions of the acquisition
target prior to the date of the acquisition, from the acquisition transaction itself, or from actions after the acquisition.
Defending potential lawsuits could cost us significant expense and distract management’s attention from the
operation of the business. Additionally, these lawsuits could result in the cancellation of, or the inability to renew,
certain insurance coverage that would be necessary to protect our assets.

We may be required to modify our business practices, pay fines and significant expenses or experience other
losses due to governmental investigations or other enforcement activities.

We may become subject to litigation or governmental investigations in the United States and foreign
jurisdictions that may arise from the conduct of our business. Like many companies in our industry, we have from
time to time received inquiries and other types of information requests from government authorities.

While the ultimate outcomes of investigations and legal proceedings are difficult to predict, adverse resolutions

or settlements of those matters could result in, among other things:

•

significant damage awards, fines, penalties or other payments, and administrative remedies, such as
exclusion and/or debarment from government programs, or other rulings that preclude us from
operating our business in a certain manner;

changes and additional costs to our business operations to avoid risks associated with such litigation or
investigations;

product recalls;

reputational damage and decreased demand for our products; and

expenditure of significant time and resources that would otherwise be available for operating our
business.

RISKS RELATING TO GOVERNMENT REGULATION

Virtually all aspects of our business activities are regulated by government agencies. The manufacturing,
processing, formulation, packaging, labeling, distribution, promotion and sampling, advertising of our products, and
disposal of waste products arising from such activities are subject to governmental regulation. These activities are
regulated by one or more of the FDA, the Federal Trade Commission, ("FTC"), the Consumer Product Safety
Commission, the U.S. Department of Agriculture and the U.S. Environmental Protection Agency, ("EPA"), as well
as by comparable agencies in foreign countries. These activities are also regulated by various agencies of the states
and localities in which our products are sold. For more information, see “ Business—Government Regulation" in
Part I, Item 1 of this Form 10-K.

Like all pharmaceutical manufacturers, we are subject to regulation by the FDA under the Federal Food, Drug
and Cosmetic Act ("FDCA"). All new drugs must be the subject of an FDA-approved new drug application,
("NDA"), before they may be marketed in the United States. The FDA has the authority to withdraw existing NDA
approvals and to review the regulatory status of products marketed under the enforcement policy. The FDA may
require an approved NDA for any drug product marketed under the enforcement policy if new information reveals
questions about the drug’s safety and effectiveness. All drugs must be manufactured in conformity with GMP, and
drug products subject to an approved NDA must be manufactured, processed, packaged, held and labeled in
accordance with information contained in the NDA. Since we rely on third parties to manufacture our products,
GMP requirements directly affect our third party manufacturers and indirectly affect us. The manufacturing facilities
of our third-party manufacturers are continually subject to inspection by such governmental agencies, and
manufacturing operations could be interrupted or halted in any such facilities if such inspections prove
unsatisfactory. Our third-party manufacturers are subject to periodic inspection by the FDA to assure such
compliance.

Even after regulatory approval, certain developments may decrease demand for our products, including the

following:

•

the re-review of products that are already marketed;

new scientific information and evolution of scientific theories;

the recall or loss of marketing approval of products that are already marketed;

changing government standards or public expectations regarding safety, efficacy or labeling changes;
and

greater scrutiny in advertising and promotion.

Certain regulatory changes or decisions could make it more difficult for us to sell our products and could have a
material adverse effect on our business, results of operations, financial condition and cash flows. Manufacturers of
drug products and their facilities are subject to continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with GMP and other applicable regulations. If we or a regulatory agency
discovers previously unknown problems with a product, such as adverse events of unanticipated severity or
frequency, or problems with a facility where the product is manufactured, a regulatory agency may impose
restrictions on that product or the manufacturer, including withdrawal of the product from the market or suspension
of manufacturing. If we, our partners or the manufacturing facilities for our products fail to comply with applicable
regulatory requirements or violate healthcare laws, a regulatory agency may take the following actions, among
others:

•

issue warning letters or untitled letters;

impose civil or criminal penalties

suspend or withdraw regulatory approval;

suspend any ongoing clinical trials;

•

refuse to approve pending applications or supplements to applications submitted by us;

impose restrictions on operations, including costly new manufacturing requirements; or

seize or detain products or require us to initiate a product recall.

Any change in the FDA’s enforcement policy could have a material adverse effect on our business, financial
condition and results of operations. We cannot determine what effect changes in regulations or statutes or legal
interpretation, when and if promulgated or enacted, may have on our business in the future. Such changes, or new
legislation, could have a material adverse effect on our business, financial condition and results of operations.

Proposed legislation may permit re-importation of drugs from other countries into the U.S., including foreign
countries where the drugs are sold at lower prices than in the U.S., which could materially and adversely affect
our operating results and our overall financial condition.

In previous years, legislation has been introduced in Congress that, if enacted, would permit more widespread
re-importation of drugs from foreign countries into the U.S., which may include re-importation from foreign
countries where the drugs are sold at lower prices than in the U.S. Such legislation, or similar regulatory changes, if
enacted, could decrease the price we receive for any approved products which, in turn, could materially and
adversely affect our operating results and our overall financial condition.

We must comply with the CREATES Act.

There have been a number of recent regulatory and legislative initiatives designed to encourage generic
competition for pharmaceutical products, including expedited review procedures for generic manufacturers and
incentives designed to spur generic competition of branded drugs. In particular, FDA and FTC have been focused on
brand companies’ denial of drug supply to potential generic competitors for testing. In December 2019, the Creating
and Restoring Equal Access to Equivalent Samples Act, or the CREATES Act, was enacted, which provides a
legislatively defined private right of action under which eligible product developers can bring suit against companies
who refuse to sell sufficient quantities of their branded products on commercially reasonable, market-based terms to
support such eligible product developers’ marketing applications. We cannot currently predict the specific outcome
or impact on our business of such regulatory and legislative initiatives.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S.
companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or
retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. If
our competitors engage in these practices, they may receive preferential treatment from officials or agencies in some
countries, giving our competitors an advantage in securing business from government officials who might give them
priority in obtaining new licenses, which would put us at a disadvantage. We have established formal policies or
procedures for prohibiting or monitoring this conduct, but we cannot assure you that our employees or other agents
will not engage in such conduct for which we might be held responsible. If our employees or other agents are found
to have engaged in such practices, we could suffer severe penalties.

We must comply with the Physician Payment Sunshine Act.

We are required to comply with the United States Physician Payment Sunshine Act, which requires
manufacturers of drugs, medical devices and biologicals that participate in U.S. federal healthcare programs to
report certain payments and items of value given to physicians and teaching hospitals. Manufacturers are required to
report this information annually to The Centers for Medicare & Medicaid Services ("CMS"). In addition, some
states require reporting information concerning payments to health care providers or other transfers of value by drug
manufacturers beyond the requirements of the Federal Sunshine Act. Cumberland has implemented a series of
policies and procedures for every employee involved in the data collection process, and has systems in place to
capture the data, which is verified by an outside firm that specializes in reporting the payments. Cumberland has also
established a system to ensure that data was reported completely, in the correct format, and on time. Despite these

policies, procedures and systems, we cannot assure you that we will collect and report all data accurately. If we fail
to accurately report this information, we could suffer severe penalties.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or
other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties,
sanctions and fines, which could have a material adverse effect on our business, financial condition, results of
operations and growth prospects.

We participate in the Medicaid Drug Rebate program, the 340B program, and other governmental pricing
programs and have obligations to report the average sales price for certain of our drugs to CMS. These programs
and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by
us, governmental or regulatory agencies and the courts, which can change over time.

In the case of our Medicaid pricing data, if we become aware that our reporting for a prior quarter was
incorrect or has changed as a result of recalculation of the pricing data, we are obligated to resubmit the corrected
data for up to three years after those data originally were due. Such restatements and recalculations increase our
costs for complying with the laws and regulations governing the Medicaid Drug Rebate program and could result in
an overage or underage in our rebate liability for past quarters. Price recalculations also may affect the ceiling price
at which we are required to offer our products under the 340B program.

Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product
information to the government, if we are found to have made a misrepresentation in the reporting of our average
sales price, if we fail to submit the required price data on a timely basis, or if we are found to have charged 340B
covered entities more than the statutorily mandated ceiling price. CMS, could also decide to terminate our Medicaid
drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for
our covered outpatient drugs. We cannot assure you that our submissions will not be found by CMS to be
incomplete or incorrect. Our failure to comply with our reporting and payment obligations under the Medicaid Drug
Rebate program and other governmental programs could negatively impact our financial results.

We may be subject to foreign, federal, and state data privacy and security laws, and failure to protect our
information systems against security breaches, service interruptions, or misappropriation of data could disrupt
operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to
suffer.

In the United States, numerous federal and state laws and regulations govern the collection, use, disclosure and
protection of health-related and other personal information and could apply to our operations or the operations of our
collaborators and third-party providers. Certain of these laws grant individual rights with respect to their
information, and we may be required to expend significant resources to comply with these laws. For example, the
California Consumer Privacy Act, or CCPA, was enacted in 2020. These laws and regulations are evolving and
subject to interpretation and may impose limitations on our activities or otherwise adversely affect our business.
Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal
and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our
business. These changes may lead to additional costs and increase our overall risk exposure.

RISKS RELATING TO INTELLECTUAL PROPERTY

Our strategy to secure and extend marketing exclusivity or patent rights may provide only limited or no protection
from competition.

We seek to secure and extend marketing exclusivity for our products through a variety of means, including FDA
exclusivity and patent rights. Additional barriers for competitors seeking to enter the market include the time and
cost associated with the development, regulatory approval and manufacturing of a similar product formulation.

As discussed in Part I, Item 1, Business - Patents, Trademarks, and Other Intellectual Proprietary Rights, of
this report on Form 10-K, we have several patents for formulations of Acetadote, and have previously engaged in
litigation to enforce our patent rights.

We intend to continue to vigorously defend and protect our Acetadote product and related intellectual property
rights. If we are unsuccessful in protecting our Acetadote intellectual property rights, our competitors may be able to
introduce products into the marketplace that reduce the sales and market share of our Acetadote product which may
require us to take measures such as reducing prices or increasing our marketing expense, any of which may result in
a material adverse effect to our financial condition and results of operations.

While we consider patent protection when evaluating product acquisition opportunities, any products we
acquire in the future may not have significant patent protection. Neither the USPTO nor the courts have a consistent
policy regarding the breadth of claims allowed or the degree of protection afforded under many pharmaceutical
patents. Patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months
following the filing date of the first related application, and in some cases not at all. In addition, publication of
discoveries in scientific literature often lags significantly behind actual discoveries. Therefore, neither we nor our
licensors can be certain that we or they were the first to make the inventions claimed in our issued patents or
pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these
patent applications. In addition, changes in either patent laws or in interpretations of patent laws in the U.S. and
other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.
Furthermore, our competitors may independently develop similar technologies or duplicate technology developed by
us in a manner that does not infringe our patents or other intellectual property. As a result of these factors, our patent
rights may not provide any commercially valuable protection from competing products.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our
technology and products could be adversely affected.

In addition to patents, we rely upon trade secrets, unpatented proprietary know-how and continuing
technological innovation where we do not believe patent protection is appropriate or attainable. For example, the
manufacturing process for Kristalose involves substantial trade secrets and proprietary know-how. We have entered
into confidentiality agreements with certain key employees and consultants pursuant to which such employees and
consultants must assign to us any inventions relating to our business if made by them while they are our employees,
as well as certain confidentiality agreements relating to the acquisition of rights to products. Confidentiality
agreements can be breached, though, and we might not have adequate remedies for any breach. Also, others could
acquire or independently develop similar technology.

We may depend on certain licensors for the maintenance and enforcement of intellectual property rights and
have limited, if any, control over the amount or timing of resources that our licensors devote on our behalf.

When we license products, we often depend on our licensors to protect the proprietary rights covering those
products. We have limited, if any, control over the amount or timing of resources that our licensors devote on our
behalf or the priority they place on maintaining patent or other rights and prosecuting patent applications to our
advantage. While any such licensor is expected to be contractually obligated to diligently pursue its patent
applications and allow us the opportunity to consult, review and comment on patent office communications, we
cannot be sure that it will perform as required. If a licensor does not perform and if we do not assume the
maintenance of the licensed patents in sufficient time to make required payments or filings with the appropriate
governmental agencies, we risk losing the benefit of all or some of those patent rights.

If the use of our technology conflicts with the intellectual property rights of third parties, we may incur
substantial liabilities, and we may be unable to commercialize products based on this technology in a profitable
manner or at all.

If our products conflict with the intellectual property rights of others, they could bring legal action against us or
our licensors, licensees, manufacturers, customers or collaborators. If we were found to be infringing a patent or
other intellectual property rights held by a third party, we could be forced to seek a license to use the patented or
otherwise protected technology. We might not be able to obtain such a license on terms acceptable to us or at all. If
legal action involving an alleged infringement or misappropriation were to be brought against us or our licensors, we
would incur substantial costs in defending the action. If such a dispute were to be resolved against us, we could be
subject to significant damages, and the manufacturing or sale of one or more of our products could be enjoined.

We may be involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors,
which could be costly and time consuming.

We have been involved in lawsuits for infringement of the Acetadote Patents as previously described. Because
of their nature, these lawsuits can be costly and time-consuming, and we only experience limited benefits and patent
protection. A significant adverse ruling in any such lawsuit could put our patents at risk of being invalidated or
interpreted narrowly and could compromise the issuance of our existing patent applications.

Competitors may infringe on our patents or the patents of our collaborators or licensors. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-
consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put
one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications
at risk of not issuing.

Interference proceedings brought by the USPTO may be necessary to determine the priority of inventions with
respect to our patent applications or those of our collaborators or licensors. Litigation or interference proceedings
may fail and, even if successful, may result in substantial costs and distraction of our management. We may not be
able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly
in countries where the laws may not protect such rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property
litigation, some of our confidential information could be disclosed during this type of litigation. In addition, there
could be public announcements of the results of hearings, motions or other interim proceedings or developments.

We may be involved in lawsuits to protect or enforce our trademarks or for allegedly infringing the trademark
rights of others, which could be costly and time consuming.

We own certain trademark registrations for each of our branded pharmaceutical products as well as for our
corporate name and logo. We have applied for trademark registration for other various names and logos. We also
may have common law trademark rights in unregistered names, phrases, and logos under which we market or offer
certain products and services. Over time, we intend to obtain and maintain registrations on trademarks that remain
valuable to our business.

Third parties may oppose registration of our federal trademark applications. Further, we could be involved in
lawsuits for allegedly infringing the rights of others with respect to their prior-existing trademarks. These lawsuits or
opposition proceedings can be costly and time-consuming. A significant adverse ruling in any such lawsuit could put
our trademarks at risk of being invalidated and could compromise the issuance of our existing trademark
applications.

Competitors may infringe on our trademarks or the trademarks of our collaborators or licensors. To counter
infringement or unauthorized use, we may be required to file trademark infringement claims, which can be
expensive and time-consuming. In addition, in a trademark infringement proceeding, a court may decide that a
trademark registration of ours is not valid or is unenforceable, or may refuse to stop the other party from using the
mark or a mark that is similar to our registered mark at issue on the grounds that the competitor’s use of the mark is
not confusingly similar to our registered trademark. An adverse result in any litigation or defense proceeding could
put one or more of our trademark registrations at risk of being invalidated or interpreted narrowly and could put our
trademark applications at risk of not registering.

If we breach any of the agreements under which we license rights to our products and product candidates from
others, we could lose the ability to continue commercialization of our products and development and
commercialization of our product candidates.

We have exclusive licenses for the marketing and sale of certain products and may acquire additional licenses.
Such licenses may terminate prior to expiration if we breach our obligations under the license agreement related to
these pharmaceutical products. For example, the licenses may terminate if we fail to meet specified quality control
standards, including GMP with respect to the products, or commit a material breach of other terms and conditions of
the licenses. Such early termination could have a material adverse effect on our business, financial condition and
results of operations.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their
former employers.

As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously
employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.
Although no claims against us are currently pending, we may be subject to claims that we or these employees have
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.
Litigation may be necessary to defend against these claims. Even if we are successful in defending against these
claims, litigation could result in substantial costs and be a distraction to management. We are subject to stringent
government regulation. All of our products face regulatory challenges.

RISKS RELATED TO OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our operating results are likely to fluctuate from period to period.

We are a company actively seeking to deliver significant growth. As we execute our business strategy of
adding new products, increasing market share in our existing growth products and striving to maintain market share
in our other products, we anticipate that there may be fluctuations in our future operating results. We may not be
able to maintain or improve our current levels of revenue or income. Potential causes of future fluctuations in our
operating results may include:

•

New product launches, which could increase revenues but also increase sales and marketing expenses;

Acquisition activity and other charges;

Increases in research and development expenses resulting from the acquisition of a product candidate
that requires significant additional studies and development;

Ability to utilize unrecognized federal and state net operating loss carryforwards as a result of the
exercise of nonqualified options

Changes in the competitive, regulatory or reimbursement environment, which could drive down
revenues or drive up sales and marketing or compliance costs; and

Unexpected product liability or intellectual property claims and lawsuits.

See also “Management’s discussion and analysis of financial condition and results of operations—Liquidity
and capital resources.” Fluctuation in operating results, particularly if not anticipated by investors and other
members of the financial community, could add to volatility in our stock price. The COVID-19 coronavirus has
negatively impacted the financial markets and may create additional risk for our customers and their ability to pay
for our products.

Our focus on acquisitions as a growth strategy has created intangible assets whose amortization could negatively
affect our results of operations.

Our total assets include intangible assets related to our acquisitions. As of December 31, 2021, intangible
assets relating to products, which are being amortized, represented approximately 28% of our total assets. We may
never realize the value of these assets. U.S. Generally Accepted Accounting Principles ("GAAP") require that we
evaluate on a regular basis whether events and circumstances have occurred that indicate that all or a portion of the
carrying amount of the asset may no longer be recoverable, in which case we would write down the value of the
asset and take a corresponding charge to earnings. Any determination requiring the write-off of a significant portion
of unamortized intangible assets would adversely affect our results of operations.

We may need additional funding and may be unable to raise capital when needed, which could force us to delay,
reduce or eliminate our product development or commercialization and marketing efforts.

We may need to raise additional funds in order to meet the capital requirements of running our business and
acquiring and developing new pharmaceutical products. If we require additional funding, we may seek to sell
common stock or other equity or equity-linked securities, which could result in dilution to our shareholders. We may
also seek to raise capital through a debt financing, which would result in ongoing debt-service payments and
increased interest expense. Any financings would also likely involve operational and financial restrictions being
imposed on us. We might also seek to sell assets or rights in one or more commercial products or product
development programs. Additional capital might not be available to us when we need it. We are unable to predict the
impact of global credit market trends, and if economic conditions deteriorate, our business, results of operations and
ability to raise needed capital could be materially and adversely affected. If we are unable to raise additional capital
when needed due to the reasons listed above and lack of creditworthiness, bank failures, or price decline in market
investments, we could be forced to scale back our operations to conserve cash.

If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us
to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating
results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial
information and have a negative effect on the market price for shares of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and mitigate the risk of
fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by,
or under the supervision of, our principal executive officer and principal financial officer, and affected by our board
of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP.

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal
control over financial reporting. We cannot assure you that the measures we will take to improve these controls will
be successful or that we will implement and maintain adequate controls over our financial processes and reporting in
the future as we continue to expand. If we are unable to establish appropriate internal financial reporting controls
and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial
statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose
confidence in our reported financial information and have a negative effect on the market price for shares of our
common stock.

In addition, we maintain a system of internal controls and provide training to employees designed to provide
reasonable assurance that unlawful and fraudulent activity, including misappropriation of assets, fraudulent financial
reporting, and unauthorized access to sensitive or confidential data is either prevented or timely detected. However,
in the event that our employees engage in such fraudulent behavior, we could suffer material adverse consequences.

Changes in, or interpretations of, accounting principles could have a significant impact on our financial position
and results of operations.

We prepare our consolidated financial statements in accordance with GAAP. These principles are subject to
interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A
change in these principles can have a significant effect on our reported results and may even retroactively affect
previously reported transactions.

For example, in recent years, the U.S.-based Financial Accounting Standards Board, ("FASB"), has worked
together with the International Accounting Standards Board, ("IASB"), on several projects to further align
accounting principles and facilitate more comparable financial reporting between companies who are required to
follow GAAP under SEC regulations and those who are required to follow International Financial Reporting
Standards, ("IFRS"), outside of the U.S. These efforts by the FASB and IASB may result in different accounting
principles under GAAP that may result in materially different financial results for us in certain areas.

We may incur losses in the future and we may not achieve or maintain profitability.

We intend to continue to spend significant amounts on our efforts to discover and develop drugs. As a result,

we may incur losses in future periods.

We anticipate that our drug discovery and development efforts and related expenditures will increase as we
focus on the studies, including clinical trials prior to seeking regulatory approval, that are required before we can sell
a drug product.

The development of drug products will require us to spend significant funds on research, development,

testing, obtaining regulatory approvals, manufacturing and marketing.

We cannot be certain whether or when we will achieve profitability because of the significant uncertainties
relating to our ability to generate commercially successful drug products. Even if we are successful in obtaining
regulatory approvals for manufacturing and commercializing additional drug products, we may incur losses if our
drug products do not generate significant revenues. If we achieve profitability, we may not be able to sustain or
increase profitability.

We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect
on our shareholders or may otherwise adversely affect our business.

If we raise funds through the issuance of additional equity, whether through private placements or public
offerings, such an issuance would dilute ownership of our current shareholders that do not participate in the
issuance. If we are unable to obtain any needed additional funding, we may be required to reduce the scope of,
delay, or eliminate some or all of, our planned research, development and commercialization activities or to license
to third parties the rights to develop and/or commercialize products or technologies that we would otherwise seek to
develop and/or commercialize ourselves or on terms that are less attractive than they might otherwise be, any of
which could materially harm our business.

Furthermore, the terms of any additional debt securities we may issue in the future may impose restrictions on
our operations, which may include limiting our ability to incur additional indebtedness, pay dividends on or
repurchase our common shares, or make certain acquisitions or investments. In addition, we may be subject to
covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be
affected by events outside of our control.

Our officers, directors, and principal shareholders, acting as a group, could significantly influence corporate
actions.

As of December 31, 2021, our officers and directors control approximately 41.6 percent of our common
stock. Acting together, these shareholders could significantly influence any matter requiring approval by our
shareholders, including the election of directors and the approval of mergers or other business combinations. The
interests of this group may not always coincide with our interests or the interests of other shareholders and may
prevent or delay a change in control. This significant concentration of share ownership may adversely affect the

trading price of our common stock because many investors perceive disadvantages to owning stock in companies
with controlling shareholders.

Research analysts may not continue to provide or initiate coverage of our common stock or may issue negative
reports.

The market for our common stock may be affected by the reports financial analysts publish about us. If one of
the analysts covering us downgrades our stock, its price could decline rapidly and significantly. Securities analysts
covering our common stock may discontinue coverage. A lack of research coverage may adversely affect our stock’s
market price.

RISKS RELATED TO OWNING OUR STOCK

The market price of our common stock may fluctuate substantially.

The price for the shares of our common stock sold in our initial public offering was determined by negotiation
between the representatives of the underwriters and us. This price may not have reflected the market price of our
common stock following our initial public offering. Moreover, the market price of our common stock might decline
below current levels. In addition, the market price of our common stock is likely to be highly volatile and may
fluctuate substantially. Sales of a substantial number of shares of our common stock in the public market or the
perception that these sales may occur could cause the market price of our common stock to decline.

The realization of any of the risks described in these “Risk Factors” could have a dramatic and material
adverse impact on the market price of our common stock. In addition, securities class action litigation has often been
instituted against companies whose securities have experienced periods of volatility in market price. Any such
securities litigation brought against us could result in substantial costs and a diversion of management’s attention
and resources, which could negatively impact our business, operating results and financial condition. The recent
COVID-19 pandemic may cause increased risk to our common stock’s liquidity and trading price.

Unstable market conditions may have serious adverse consequences on our business.

Our general business strategy may be adversely affected by unpredictable and unstable market conditions.
While we believe we have adequate capital resources to meet current working capital and capital expenditure
requirements, a radical economic downturn or increase in our expenses could require additional financing on less
than attractive rates or on terms that are dilutive to existing shareholders. Failure to secure any necessary financing
in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial
performance and stock price and could require us to delay or abandon clinical developments plans. There is a risk
that one or more of our current service providers, manufacturers and other partners may encounter difficult
economic circumstances, which would directly affect our ability to attain our operating goals on schedule and on
budget. The equity and lending markets have been and will most likely continue to be negatively impacted for an
unknown period of time due to the COVID-19 pandemic.

We experience costs and regulatory risk as a result of operating as a public company, and our management is
required to devote time to compliance initiatives.

We have and will continue to incur costs as a result of operating as a public company, and our management is
required to devote time to compliance initiatives. As a public company, we have and will continue to incur legal,
accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of
2002, or Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and other
rules and regulations subsequently implemented by the SEC and Nasdaq, have imposed various requirements on
public companies, including the establishment and maintenance of effective disclosure and financial controls and
changes in corporate governance practices. These rules and regulations have and will continue to result in legal and
financial compliance costs and render some activities more time-consuming and costly. Despite the internal controls
and procedures put in place to maintain compliance with securities laws and regulations, our employees may still fail
to comply with all SEC disclosure and reporting requirements. Such failure could lead to administrative and civil
penalties, criminal penalties, and private litigation with shareholders. The consequences could have a material effect
on our ability to effectively market our products and operate our business.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial
reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and
testing of our internal controls over financial reporting to allow management to report on the effectiveness of our
internal controls over financial reporting. Our testing may reveal deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses.

Our compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting
expense and expend significant management efforts. Moreover, if we are not able to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we identify deficiencies in our internal controls
over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and
we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would
require additional financial and management resources.

We may not be able to maintain our listing on the NASDAQ Global Select Market (“NASDAQ”), which could
have a material adverse effect on us and our stockholders.

The standards for continued listing on NASDAQ include, among other things, that the minimum bid price for
the listed securities not fall below $1.00 for a period in excess of thirty consecutive business days. If the closing bid
price of our common stock were to fail to meet NASDAQ’s minimum closing bid price requirement, or if we
otherwise fail to meet any other applicable requirements of NASDAQ and we are unable to regain compliance,
NASDAQ may make a determination to delist our common stock. The delisting of our common stock from
NASDAQ could negatively impact us by (i) reducing the liquidity and market price of our common stock; (ii)
reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our
ability to raise equity financing; (iii) impacting our ability to use a registration statement to offer and sell freely
tradable securities, thereby preventing or limiting us from accessing the public capital markets; and (iv) impairing
our ability to provide equity incentives to our employees.

Some provisions of our third amended and restated charter, bylaws and Tennessee law may inhibit potential
acquisition bids that you may consider favorable.

Our corporate documents contain provisions that may enable our board of directors to resist a change in control
of our company even if a change in control were to be considered favorable by you and other shareholders. These
provisions include:

•

The authorization of undesignated preferred stock, the terms of which may be established and shares of
which may be issued without shareholder approval;

Advance notice procedures required for shareholders to nominate candidates for election as directors or
to bring matters before an annual meeting of shareholders;

Limitations on persons authorized to call a special meeting of shareholders;

A staggered board of directors;

A restriction prohibiting shareholders from removing directors without cause;

A requirement that vacancies in directorships are to be filled by a majority of the directors then in
office and the number of directors is to be fixed by the board of directors; and

No cumulative voting.

These and other provisions contained in our third amended and restated charter and bylaws could delay or
discourage transactions involving an actual or potential change in control of us or our management, including
transactions in which our shareholders might otherwise receive a premium for their shares over then current prices,
and may limit the ability of shareholders to remove our current management or approve transactions that our
shareholders may deem to be in their best interests and, therefore, could adversely affect the price of our common
stock.

In addition, we are subject to control share acquisitions provisions and affiliated transaction provisions of the
Tennessee Business Corporation Act, the applications of which may have the effect of delaying or preventing a
merger, takeover or other change in control of us and therefore could discourage attempts to acquire our company.

We have never paid cash dividends on our capital stock.

We have never paid cash dividends on our capital stock. The availability of funds for distributions to
shareholders will depend on our financial performance and assets. Any future decision to declare or pay dividends
will be at the sole discretion of our Board of Directors.

DEBT-RELATED RISKS

Our Revolving Credit Agreement impose restrictive and financial covenants on us. Our failure to comply with
these covenants could trigger events that would have a material adverse effect on our business.

Our Revolving Credit Agreement contains covenants that restrict the way we conduct business and require us to
satisfy certain financial tests in order to incur debt or take other actions. Additionally, our Revolving Credit
Agreement contains financial covenants that, for example, require us to maintain certain financial ratios which are
measured at the end of each fiscal quarter.

Our Revolving Credit Agreement contains specified quarterly financial maintenance covenants. As of
December 31, 2021, we were in compliance with the Tangible Capital Ratio financial covenant of the Revolving
Credit Agreement. However, we can make no assurance that we will be able to comply with the restrictive and
financial covenants contained in the Revolving Credit Agreement in the future.

Our inability to comply with the covenants in our debt instruments could lead to a default or an event of default
under the terms thereof, for which we may need to seek relief from our lender in order to waive the associated
default or event of default and avoid a potential acceleration of the related indebtedness or cross-default or cross-
acceleration to other debt. There can be no assurance that we would be able to obtain such relief on commercially
reasonable terms or otherwise and we may be required to incur significant additional costs. In addition, the lender
under our Revolving Credit Agreement may impose additional operating and financial restrictions on us as a
condition to granting any such waiver. If an event of default is not cured or is not otherwise waived, the lender under
our Revolving Credit Agreement may accelerate the maturity of the related debt, foreclose upon any collateral
securing the debt and terminate any commitments to lend, any of which would have a material adverse effect on our
business, financial condition, cash flows and results of operations and would cause the market value of our securities
to decline.

We have risks related to interest rates.

Our revolving credit facility bears interest based on variable interest. Thus, a change in the short-term interest
rate environment (especially a material change) could have a material adverse effect on our business, financial
condition, cash flows and results of operations. As of December 31, 2021, we did not have any outstanding interest
rate swap contracts.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2021, we leased approximately 25,500 square feet of office space in Nashville, Tennessee
for our corporate headquarters. The lease expires in October 2022. On November 15, 2021, we entered into a lease
for 16,631 rentable square feet of space at the new Broadwest development in Nashville, Tennessee for our
corporate headquarters. The lease commences on the earlier of November 1, 2022, the date on which we take
occupancy of the leased premise, or the date on which we receive a temporary or permanent certificate of occupancy
for the leased premise. We believe these facilities are adequate to meet our current needs for office space.
Manufacturing, packaging or warehousing services are provided to us through contracts with third-party
organizations.

The laboratory space at CET, under an agreement amended in July 2012, is leased through April 2023, with an
option to extend the lease through April 2028. CET leases approximately 14,200 square feet of office and wet
laboratory space in Nashville, Tennessee to operate the CET Life Sciences Center. Cumberland's product
formulation and testing laboratories are located at this facility, along with CET's offices. The CET Life Sciences
Center also provides laboratory and office space, equipment and infrastructure to early-stage life sciences companies
and university spin-outs.

Item 3. Legal Proceedings.

Please see the discussion of our Acetadote patent defense legal proceedings contained in Part 1, Item 1, Business
-Patents, Trademarks and Other Intellectual Proprietary Rights, of this Form 10-K, which is incorporated by
reference herein. Please see discussion of Melinta Litigation in Note 22 Commitments and Contingencies contained
in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.

Market Information

Our common stock, no par value, has been traded on the Nasdaq Global Select Market since August 11, 2009
under the symbol “CPIX.” As of March 7, 2022, we had 84 shareholders of record of our common stock. This
excludes shareholders whose shares are held by brokers and other institutions on behalf of shareholders. The closing
price of our common stock on the Nasdaq Global Select Market on March 7, 2022 was $2.97 per share.

Dividend Policy

We have not declared or paid any cash dividends on our common stock. Any future decision to declare or pay

dividends will be at the sole discretion of our Board of Directors.

Performance Graph

The stock performance graph below illustrates a comparison of the total cumulative stockholder return on our
common stock since December 31, 2016 to the Nasdaq Composite and a composite of seven Nasdaq Pharmaceutical
and Specialty Pharmaceutical Stocks which most closely compare to our Company. The graph assumes an initial
investment of $100 on December 31, 2016, and that all dividends were reinvested.

Purchases of Equity Securities

The Company currently has a share repurchase program to repurchase up to $10.0 million of our common stock
pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. In January 2019, the Company's
Board of Directors established the current $10.0 million repurchase program to replace the prior authorizations. We
repurchased 438,359 shares, 503,626 shares and 623,478 shares of common stock for approximately $1.4 million,
$1.8 million and $3.5 million, and during the years ended December 31, 2021, 2020 and 2019, respectively.

The following table summarizes the activity, by month, during the fourth quarter of 2021:

Period

Total Number
of Shares (or
Units)
Purchased

October

November

December

Total

33,071

35,095 (1)

43,656

111,822

Average
Price Paid
per Share
(or Unit)

$2.74

$2.56

$4.68

Total Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs

33,071

35,095

43,656

$5,073,858

$4,984,063

$4,779,633

(1) Of this amount, 1,162 shares were repurchased directly in private purchases at the then-current fair market value of common
stock.

Period EndingIndex ValueCOMPARISON OF CUMULATIVE TOTAL RETURNPeer CompositeCPIXNASDAQ Composite12/31/1612/31/1712/31/1812/31/1912/31/2012/31/21$0$50$100$150$200$250$300$350

Item 6. Reserved.

None.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial position and results of operations should be read
together with our audited consolidated financial statements and related notes appearing elsewhere in this Form 10-
K. This discussion and analysis may contain forward-looking statements that involve risks and uncertainties –
please refer to the section entitled, “Special Note Regarding Forward-Looking Statements,” contained in Part I,
Item 1A, “Risk Factors,” of this Form 10-K. You should review the “Risk Factors” section of this Form 10-K for a
discussion of important factors that could cause actual results to differ materially from the results described in or
implied by the forward-looking statements described in the following discussion and analysis.

EXECUTIVE SUMMARY

We are a specialty pharmaceutical company focused on the acquisition, development and commercialization of
branded prescription pharmaceutical products. We are dedicated to providing innovative products that improve the
quality of care for patients and address poorly met medical needs.

Our commercial portfolio includes eight branded products approved for marketing by the U.S. Food and Drug
Administration (“FDA”) - Acetadote®, Caldolor®, Kristalose®, Omeclamox®-Pak, RediTrex®, Sancuso®, Vaprisol®
and Vibativ®.

In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban
product candidates for 1) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy, a fatal,
genetic neuromuscular disease, 2) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder
characterized by fibrosis of the skin and internal organs and 3) Aspirin-Exacerbated Respiratory Disease, a severe
form of asthma.

Our primary target markets are hospital acute care, gastroenterology, rheumatology and oncology. These
medical specialties are characterized by relatively concentrated prescriber bases that we believe can be served
effectively by small, targeted sales forces. We promote our approved products through our hospital, field and
oncology sales divisions in the United States and are establishing a network of international partners to register and
provide our medicines to patients in their countries.

We have established the capabilities needed to acquire, develop and commercialize branded pharmaceuticals in

the U.S. and believe we can leverage this existing infrastructure to support our expected growth.

Our management team consists of pharmaceutical industry veterans with significant experience in their areas of
responsibility. Our business development team identifies, evaluates, and negotiates product acquisition, licensing
and co-promotion agreements. Our product development team creates proprietary formulations, manages our clinical
studies, prepares our FDA submissions and staffs our medical call center. Our quality and manufacturing
professionals oversee the manufacturing, release and shipment of our products. Our marketing and sales
organization is responsible for our commercial activities, and we work closely with our distribution partners to
ensure the availability of our products.

The following is a summary of our 2021 highlights and recent developments. For more information, please see

Part I, Item I, Business, of this Form 10-K.

•

Agreement to acquire the U.S. rights to Sancuso® (granisetron transdermal patch), an FDA-approved
oncology supportive care medicine.

FDA approval of expanded labeling for our Caldolor® product (intravenously delivered ibuprofen), for use
prior to surgery.

Commencement of the national launch of our RediTrex® product line (prefilled methotrexate syringes).

Agreement to relocate our corporate headquarters to the new Broadwest campus in the West End/
Vanderbilt corridor in Nashville, with a move planned for late 2022.

Extension of our line of credit with Pinnacle Bank for a new three-year term, and expansion of the facility
for up to $20 million.

Renewal of our At-the-Market facility, for up to $19 million in equity financing.

Continuation of our share repurchase initiative along with a group of our Board members purchasing shares
through trading plans in the market, in order to add to their holdings in the company.

Publication of a series of study results and patient case studies in support of several of our brands.

The release of our second annual Sustainability Report, which details the company’s activities pertaining to
its environmental, social and governance (ESG) matters.

COVID-19 Pandemic

In early 2020, the U.S. declared a health care emergency following the outbreak of SARS-CoV-2, a novel strain
of coronavirus that causes COVID-19, a respiratory illness. The company has managed through the resulting
pandemic, which included stay-at-home orders, the emergence of new variants, compliance with differing federal,
state and local guidelines, among other challenges, to continue to operate our business – keeping facilities open and
our organization intact. We moved quickly to ensure the health and safety of our team. We also maintained our
ongoing compliance with the many laws and regulations that apply to us as a publicly traded pharmaceutical
company.

Throughout the pandemic, Cumberland has faced the same challenges affecting other companies that rely on
hospital admissions and patient visits to drive revenue. Our clinical studies were also impacted, as fewer patients
sought elective surgeries and our access to medical facilities was substantially limited. We carefully monitored our
supply chain, including the flow of raw materials into and the batches of finished products emerging from the
facilities that manufacture our products.

Despite the challenges of operating during a pandemic, Cumberland has remained committed to our mission of
providing innovative products that improve the quality of care for patients. We continued to build our portfolio of
innovative and differentiated products through a multifaceted strategy that includes the development of new
candidates and acquisition of established brands. Our resulting, diversified product line has enabled us to weather
external challenges, while our team has remained responsive to the evolving medical market. We are prepared for
and look forward to future opportunities to carry out our mission. Overall, we have been able to deliver our products
while addressing the interests of our shareholders, employees, partners and community.

ESG Report

In July 2021, we released our second annual Sustainability Report, which details Cumberland’s activities
pertaining to our environmental, social and governance (“ESG”) matters. After issuing our inaugural ESG Report
the prior year, we remain committed to sustainability and to maintaining transparency of our corporate operations.
We hold ourselves to the highest standards of ethical practices and understand the importance of recognizing and
addressing our impact on our constituents, the community and the environment.

The Sustainability Report notes that during that year we provided nearly 2.5 million patient doses of our
products, safely disposed of over 4,000 pounds of expired and damaged products, and had no product recalls. We
also had no Company brands listed on the FDA’s MedWatch Safety Alerts for Human Medical Products, no
Company product issues identified by the FDA’s Adverse Event Reporting System and no clinical trials terminated
due to failure to practice good clinical standards.

The Sustainability Report also highlights our investment in our employees through our continuing education

programs, employee development initiatives and employee recognition awards. We reported that women represented
46% of Cumberland’s workforce – and 18% of our employees were minorities.

Cybersecurity

The Company has taken appropriate steps to monitor an adequate level of cybersecurity. The Company is

insured against cyber attacks and has appropriate detection and mitigation controls in place.

We were incorporated in 1999 and have been headquartered in Nashville, Tennessee since our inception. The
is

Company’s common
www.cumberlandpharma.com and our various filings are available to the public at www.sec.gov.

stock exchange, our website address

the Nasdaq

shares are

listed on

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Accounting Estimates and Judgments

The preparation of the consolidated financial statements in conformity with GAAP requires management to
make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the period. We base our estimates on past experience and on other factors we deem reasonable given the
circumstances. Past results help form the basis of our judgments about the carrying value of assets and liabilities that
are not determined from other sources. Actual results could differ from these estimates. These estimates, judgments
and assumptions are most critical with respect to our accounting for revenue recognition, inventory, intangible assets
and goodwill, research and development accounting, contingent consideration liability, provision for income taxes
and share-based payments.

Revenue Recognition

We recognize revenue in accordance with the Accounting Standards Codification (ASC) Topic 606. Effective
January 1, 2018, we adopted the Financial Accounting Standards Board’s (“FASB”) amended guidance in the form
of Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers," (ASC 606).

Our revenue is derived primarily from the product sales of our FDA approved pharmaceutical brands. Revenue
from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our
performance obligation, which occurs upon either shipment of the product or arrival at its destination, depending
upon the shipping terms of the transaction. Payment terms typically range from 30 to 60 days from date of shipment.
Our net product revenue reflects the reduction from gross product revenue for estimated allowances for chargebacks,
and discounts and reflects sales related accruals for rebates, coupons, product returns, and certain administrative and
service fees. Significant judgments must be made in determining the transaction price for our sales of products
related to these adjustments. Other revenue, which is a component of net revenues, includes non-refundable upfront
payments and milestone payments under licensing agreements along with grant and rental income. Other income
was approximately 2.6% percent of net revenues in 2021, 4.3% in 2020, and 5.8% in 2019 respectively.

Our financial statements reflect accounts receivable allowances of $0.3 million and $1.0 million at

December 31, 2021 and 2020, respectively, for chargebacks and early pay discounts for products.

The following table reflects our sales-related accrual activity for the periods indicated below:

2021

2020

2019

Balance, January 1

Current provision

4,063,435 $

4,593,167 $

4,961,631

12,127,410

13,453,894

13,081,251

Actual product returns and credits issued

(12,510,168)

(13,983,626)

(13,449,715)

Balance, December 31

3,680,677 $

4,063,435 $

4,593,167

The allowances for chargebacks and discounts and sales related accruals for rebates, fee for service and product
returns are determined on a product-by-product basis. We establish them using our 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;

•

The contractual terms with direct and indirect customers;

Analyses of historical levels of chargebacks, discounts and returns of product;

Communications with customers;

Purchased information about the rate of prescriptions being written and the level of inventory

•
remaining in the distribution channel, if known; and

Expectations about the market for each product, including any anticipated introduction of

•
competitive products.

Other organizations, such as managed care providers, pharmacy benefit management companies and
government agencies, may receive rebates from us based on either negotiated contracts to carry our products or
reimbursements for filled prescriptions. These entities are considered our indirect customers. When recognizing a
sale to a wholesaler, sales revenues are reduced and accrued liabilities are increased by our estimate of the rebate
that may be claimed.

The allowances for chargebacks and accruals for rebates and product returns are the most significant estimates
used in the recognition of our revenue from product sales. Of the accounts receivable allowances and our sales
related accruals, our accrual for fee for services and product returns represents the majority of the balance. Sales
related accrued liabilities for rebates, product returns, service fees, and administrative fees totaled $3.7 million, $4.1
million and $4.6 million as of December 31, 2021, 2020 and 2019, respectively. Of these amounts, our estimated
liability for fee for services represented $1.0 million, $1.0 million and $1.4 million, respectively, while our accrual
for product returns totaled $1.9 million, $1.7 million and $1.9 million, respectively. If the actual amount of cash
discounts, chargebacks, rebates, and product returns differs from the amounts estimated by management, material
differences may result from the amount of our revenue recognized from product sales. A change in our rebate
estimate of one percentage point would have impacted net sales by approximately $0.4 million for the years ended
December 31, 2021, 2020 and 2019. A change in our product return estimate of one percentage point would have
impacted net sales by $0.4 million for the years ended December 31, 2021, and 2020 and $0.3 million for the year
ended December 31, 2019.

Inventories

We record amounts for estimated obsolescence or unmarketable inventory in an amount equal to the difference
between the cost of inventory and the net realizable value based upon assumptions about remaining shelf life, future
demand and market conditions. The estimated inventory obsolescence amounts are calculated based upon specific
review of the inventory expiration dates and the quantity on-hand at December 31, 2021, in comparison to our
expected inventory usage. The amount of actual inventory obsolescence and unmarketable inventory could differ
(either higher or lower) in the near term from the estimated amounts. Changes in our estimates would be recorded in
our statement of operations in the period of the change.

Non-current inventories consist of API which typically has an extended life and selected finished good products

with extended life longer than one year.

Income Taxes

We provide for deferred taxes using the asset and liability approach. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carry-forwards
and differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Our principal differences are related to the timing of deductibility of certain items such as
depreciation, amortization and expense for options issued to nonemployees. Deferred tax assets and liabilities are
measured using management’s estimate of tax rates expected to apply to taxable income in the years in which
management believes those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in our results of operations in the period that includes the
enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment.

The Company’s accounting policy with respect to interest and penalties arising from income tax settlements is

to recognize them as part of the provision for income taxes.

Share-Based Payments

We recognize compensation expense for all share-based payments based on the fair value of the award on the

date of grant. In addition, incremental compensation expense is recognized upon the modification of equity awards.

We issue restricted stock and incentive stock option awards to employees, directors and consultants.
Compensation expense for restricted equity awards granted to employees and directors is generally equal to the fair
market value of the underlying common stock on the date of grant. If a sufficient disincentive for nonperformance
does not exist at the date of grant, the compensation cost is remeasured at each reporting date at the then-current fair
market value of the underlying common stock until the award vests.

Research and Development

We accrue for and expense research and development costs based on estimates of work performed, patient
enrollment or fixed-fee-for-services. As work is performed and/or invoices are received, we adjust our estimates and
accruals. To date, our accruals have not differed materially from our estimates. Total research and development costs
are a function of studies being conducted and will increase or decrease based on the level of activity in any particular
year.

Intangible Assets and Goodwill

Intangible assets include product rights, license agreements, other identifiable intangible assets and goodwill
associated with the Vibativ acquisition. We assess the impairment of goodwill at least annually. We assess the
impairment of identifiable intangible assets subject to amortization whenever events or changes in circumstances
indicate the carrying value may not be recoverable. In determining the recoverability of our intangible assets, we
make assumptions regarding estimated future cash flows and other factors. If the estimated undiscounted future cash
flows do not exceed the carrying value of the intangible assets, we must determine the fair value of the intangible
assets. If the fair value of the intangible assets is less than the carrying value, an impairment loss will be recognized
in an amount equal to the difference. Fair value is determined through various valuation techniques including quoted
market prices, third-party independent appraisals and discounted cash flow models, as considered necessary.

RESULTS OF OPERATIONS

Year ended December 31, 2021 compared to year ended December 31, 2020

The following table presents the statements of operations for the years ended December 31, 2021 and 2020:

Net revenues

Costs and expenses:

Cost of products sold

Selling and marketing

Research and development

General and administrative

Amortization
Total costs and expenses
Operating income (loss)

Interest income

Other income

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss) from continuing
operations

2021

Years ended December 31,
2020

Change

35,985,043 $

37,441,134 $

(1,456,091)

8,811,248

15,015,424

5,684,465

9,780,026

4,371,300

43,662,463

8,653,020

14,765,465

5,773,825

10,196,299

4,434,120

43,822,729

158,228

249,959

(89,360)

(416,273)

(62,820)

(160,266)

(7,677,420)

(6,381,595)

(1,295,825)

26,081

2,187,140

(98,031)

(5,562,230)

(34,891)

75,345

—

(263,627)

(6,569,877)

(55,902)

(49,264)

2,187,140

165,596

1,007,647

21,011

(5,597,121) $

(6,625,779) $

1,028,658

The following table summarizes net revenues for the years presented:

Products:

Kristalose

Vibativ

Caldolor

Acetadote
Omeclamox-Pak

Vaprisol

RediTrex

Other

Years ended December 31,

2021

2020

Change

15,993,658 $

15,567,562 $

11,704,062

4,970,301

850,993

(388,657)

1,859,581

55,321

939,784

10,870,990

5,336,943

1,874,206

257,088

1,077,227

856,657

1,600,461

426,096

833,072

(366,642)

(1,023,213)

(645,745)

782,354

(801,336)

(660,677)

Total net revenues

35,985,043 $

37,441,134 $

(1,456,091)

Net revenues. Net revenues for the year ended December 31, 2021 were approximately $36.0 million compared
to $37.4 million for the year ended December 31, 2020, representing a decrease of $1.5 million or 3.9%. As
detailed in the table above, net revenue increased during the 2021 period for three of our marketed products:
Kristalose, Vibativ and Vaprisol. The improvement was led by Vibativ which delivered $0.8 million in revenue
growth, followed by Vaprisol, which delivered an additional $0.8 million during 2021 compared to 2020. Our
largest product, Kristalose, contributed $0.4 million in incremental revenue.

These increases were offset by decreased net sales of Caldolor, Acetadote, Omeclamox-Pak and RediTrex.

We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective
January 1, 2020. In exchange for the return of these product license rights and associated non-compete provision,
Cumberland received $5 million in financial consideration paid over the two-years following the return date. The
final four installments totaling $2.0 million due from Clinigen were recorded during the year ended December 31,
2021, as discontinued operations. We do not incur expenses associated with these payments from Clinigen.

Kristalose revenue increased by $0.4 million, or 2.7%, compared to December 31, 2020 primarily as a result of

improved sales volume for the product.

Vibativ revenue was $11.7 million compared to $10.9 million in the prior year. This $0.8 million or 7.7%

increase in net revenue was a result of improved sales volume for the product.

Caldolor revenue experienced a 6.9% decrease to $5.0 million during the year ended December 31, 2021
compared to $5.3 million in the same period last year. This decrease in Caldolor revenue for the year ended
December 31, 2021 was the result of lower domestic shipments of the product, significantly impacted by COVID-19
and a reduction in elective surgeries.

Vaprisol revenue increased $0.8 million during the year ended December 31, 2021 compared to the prior year

period due primarily to increased sales of the product.

Acetadote revenue included net sales of our branded product and our share of net sales from our Authorized
Generic. For the year ended December 31, 2021, the Acetadote net revenue decreased $1.0 million compared to the
prior year due to a reduction in sales volume, primarily impacting the Authorized Generic.

Omeclamox-Pak revenue decreased $0.6 million during the year ended December 31, 2021 compared to the
prior year. The decrease was due to ownership changes at our packager which resulted in a tempoary out of stock
situation.

Reditrex revenue decreased $0.8 million in 2021 compared to 2020. Our wholesale customers initially stocked

the product in Q420, but we delayed the launch until October 2021 due to pandemic delays and supply issues.

Cost of products sold. Cost of products sold for the year ended December 31, 2021 were $8.8 million compared
to $8.7 million in the prior year. As a percentage of net revenues, cost of products sold were 24.5% compared to
23.1% during the prior year. This change in costs of products sold as a percentage of revenue was attributable to a
change in the product sales mix, particularly the increase in sales of Vibativ. The Vibativ inventory sold during the
period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018. The increase in
costs of product sold expense was due to the write off of expired inventory.

Selling and marketing. Selling and marketing expense for the year ended December 31, 2021 were
$15.0 million compared to $14.8 million in the prior year, which was an increase of $0.2 million. This increase was
primarily a result of increases in direct promotional spending.

Research and development. Research and development costs for the year ended December 31, 2021 were
$5.7 million, compared to $5.8 million last year, representing a decrease of $0.1 million. A portion of our research
and development costs is variable based on the number of trials, study sites, number of patients and the cost per
patient in each of our clinical programs. We continue to fund our ongoing clinical initiatives associated with our
pipeline products. During 2021, we experienced a decrease in study activity which was partially offset by increases
in our annual FDA user fees.

General and administrative. General and administrative expenses for the year ended December 31, 2021 were
$9.8 million compared to $10.2 million in the prior year. The decrease resulted from a decrease in legal and
professional fees as well as lower stock based compensation during the period partially offset by corporate bonuses.

The components of the statements of operations discussed above reflect the following impacts from Vibativ:

Financial Impact of Vibativ

Net revenue
Cost of products sold (1)
Royalty and operating expenses

Vibativ contribution

Years ended December 31,

2021

2020

11,704,062 $

10,870,990

4,814,464

2,011,458

4,878,140 $

3,366,201

1,952,348

5,552,441

(1) The Vibativ inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the
acquisition of the brand during 2018.

Income taxes. Income taxes totaled $34,891 for the year ended December 31, 2021 and $55,902 for the year

ended December 31, 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019

The following table presents the statements of operations for the years ended December 31, 2020 and 2019:

Net revenues

Costs and expenses:

Cost of products sold

Selling and marketing

Research and development

General and administrative

Amortization

Total costs and expenses

Operating income (loss)
Interest income
Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss) from continuing
operations

2020

Years ended December 31,
2019

Change

37,441,134 $

34,388,295 $

3,052,839

8,653,020

14,765,465

5,773,825

10,196,299

4,434,120

43,822,729

7,421,316

15,277,740

6,868,480

9,974,384

4,134,557

43,676,477

(6,381,595)

(9,288,182)

75,345

(263,627)

(6,569,877)

(55,902)

243,364

(246,186)

(9,291,004)

79,316

1,231,704

(512,275)

(1,094,655)

221,915

299,563

146,252

2,906,587

(168,019)

(17,441)

2,721,127

(135,218)

(6,625,779) $

(9,211,688) $

2,585,909

The following table summarizes net revenues for the years presented:

Products:

Kristalose

Vibativ

Caldolor

Acetadote

Omeclamox-Pak

Vaprisol

RediTrex

Other

Years ended December 31,

2020

2019

Change

15,567,562 $

12,895,120 $

10,870,990

5,336,943

1,874,206

257,088

1,077,227
856,657
1,600,461

8,691,550

5,222,282

3,824,449

837,829

936,615
—
1,980,450

2,672,442

2,179,440

114,661

(1,950,243)

(580,741)

140,612
856,657
(379,989)

Total net revenues

37,441,134 $

34,388,295 $

3,052,839

Net revenues. Net revenues for the year ended December 31, 2020 were approximately $37.4 million compared
to $34.4 million for the year ended December 31, 2019, representing an increase of $3.1 million or 8.9%. As
detailed in the table above, net revenue increased during the 2020 period for four of our marketed products:
Kristalose, Vibativ, Caldolor and Vaprisol. The improvement was led by largest product, Kristalose which delivered
$2.7 million in revenue growth, followed by Vibativ, which delivered an additional $2.2 million during 2020
compared to 2019. Our newest product, at the time, RediTrex, contributed $0.9 million in incremental revenue
during the year.

These increases were partially offset by decreased net product sales of Acetadote and Omeclamox-Pak.

We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective
January 1, 2020. As a result, the 2019 revenues and expenses associated with the products are combined and
reclassified into discontinued operations in our financial statements. In exchange for the return of these product
license rights and associated non-compete provision, Cumberland is receiving $5 million in financial consideration
paid over the two-years following the return date. The first four installments totaling $3.0 million due from Clinigen
were recorded during the year ended December 31, 2020, as discontinued operations. We do not incur expenses
associated with these payments from Clinigen.

Kristalose revenue increased by $2.7 million, or 20.7%, compared to December 31, 2019 primarily as a result of

improved sales volume for the product.

Vibativ revenue was $10.9 million compared to $8.7 million in the prior year. This $2.2 million or 25.1%

increase in net revenue was a result of improved sales volume for the product.

Caldolor revenue experienced a 2.2% increase to $5.3 million during the year ended December 31, 2020
compared to $5.2 million in the same period in the prior year. This increase in Caldolor revenue for the year ended
December 31, 2020 was the result of an increase in international shipments when compared to the prior year, which
were partially offset by lower domestic shipments of the product, significantly impacted by COVID-19 and a
reduction in elective surgeries.

Vaprisol revenue increased $0.1 million during the year ended December 31, 2020 compared to the prior year

period due primarily to increased sales of the product.

Acetadote revenue included net sales of our branded product and our share of net sales from our Authorized
Generic. For the year ended December 31, 2020, the Acetadote net revenue decreased $2.0 million compared to the
prior year due to a reduction in sales volume, primarily impacting the Authorized Generic.

Omeclamox-Pak revenue decreased $0.6 million during the year ended December 31, 2020 compared to the
prior year. The decrease was largely the result of decreased sales volume, which were negatively impacted by
COVID-19.

Cost of products sold. Cost of products sold for the year ended December 31, 2020 were $8.7 million compared
to $7.4 million in the prior year. As a percentage of net revenues, cost of products sold were 23.1% compared to
21.6% during the prior year. This change in costs of products sold as a percentage of revenue was attributable to a
change in the product sales mix, particularly the increase in sales of Vibativ. The Vibativ inventory sold during the
period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018. The increase in
costs of product sold expense was also the result of a step up in the fair value of the inventory over the cost to
Theravance, as required under purchase accounting rules.

Selling and marketing. Selling and marketing expense for the year ended December 31, 2020 were
$14.8 million compared to $15.3 million in the prior year, which was a decrease of $0.5 million. This decrease was
primarily a result of decreases in direct promotional spending, meeting costs and travel expenses. These decreases
were partially offset by increases in salaries as well as increases in royalty costs associated with growth in Vibativ
sales during the period.

Research and development. Research and development costs for the year ended December 31, 2020 were
$5.8 million, compared to $6.9 million in the prior year, representing a decrease of $1.1 million. A portion of our
research and development costs is variable based on the number of trials, study sites, number of patients and the cost
per patient in each of our clinical programs. We continue to fund our ongoing clinical initiatives associated with our
pipeline products. During 2020, we experienced a decrease in study activity which was partially offset by increases
in our annual FDA user fees.

General and administrative. General and administrative expenses for the year ended December 31, 2020 were
$10.2 million compared to $10.0 million in the prior year. The increase resulted from an increase in legal and
professional fees partially offset by lower stock based compensation during the period.

The components of the statements of operations discussed above reflect the following impacts from Vibativ:

Financial Impact of Vibativ

Net revenue
Cost of products sold (1)
Royalty and operating expenses

Years ended December 31,

2020

2019

10,870,990 $

3,366,201

1,952,348

8,691,550

2,716,305

1,609,564

Vibativ contribution

4,365,681
(1) The Vibativ inventory included in the costs of product sold during the period was acquired and paid for by Cumberland as part of the
acquisition of the brand during 2018.

5,552,441 $

Amortization. Amortization expenses represent the ratable use of our capitalized intangible assets including
product and license rights, patents, trademarks and patent defense costs. Amortization for 2020 totaled
approximately $4.4 million compared to $4.1 million in the prior year. The increase in expense was attributable to
the amortization of additional product rights and capitalized patents.

Income taxes. Income taxes totaled $55,902 for the year ended December 31, 2020 and were an income tax

benefit of $79,316 for the year ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows provided by our operations, the amounts borrowed and available
under our line of credit and the cash proceeds from our initial public offering of common stock that was completed
in August 2009. We believe that our internally generated cash flows, existing working capital and our line of credit
will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures
for the foreseeable future.

At December 31, 2021 and December 31, 2020, all our investments had original maturities of less than ninety

days and as a result were classified as cash equivalents.

The following table summarizes our liquidity and working capital as of the years ended December 31:

Cash and cash equivalents

Total cash and cash equivalents

2021

2020

27,040,816 $

24,753,796

27,040,816 $

24,753,796

Working capital (current assets less current liabilities)

26,409,053 $

24,302,146

Current ratio (multiple of current assets to current liabilities)

2.4

Revolving line of credit availability

5,000,000 $

1.9

—

The following table summarizes our net changes in cash and cash equivalents for the years ended December 31:

2021

2020

2019

Cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net (decrease) increase in cash and
cash equivalents

6,342,443 $

5,415,061 $

3,056,356

(501,893)

(3,553,530)

(1,757,789)

(7,116,111)

2,297,848

(5,080,529)

2,287,020 $

(3,458,839) $

273,675

The net $2.3 million increase in cash and cash equivalents for the year ended December 31, 2021 was
attributable to cash provided by operating activities partially offset by cash used by investing and financing
activities. Cash provided by operating activities of $6.3 million includes a reduction of inventory of $4.8 million,
most of which was Vibativ related, and cash payments received of $2.0 million provided by discontinued operations.
Cash used by investing activities of $0.5 million was the result of additions to intangibles of $0.3 million, additions
to property and equipment of $0.1 million and the payment of $0.2 million to the WHC joint venture. Our financing
activities included payments of $2.2 million of contingent consideration for Vibativ and $1.4 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.

The net $3.5 million decrease in cash and cash equivalents for the year ended December 31, 2020 was
attributable to cash used by investing and financing activities partially offset by cash provided by operating
activities. Cash provided by operating activities of $5.4 million included non-cash expense add backs for
depreciation and amortization and share-based compensation expense totaling $5.8 million and changes in our

working capital that provided net cash of $5.4 million. The cash provided by operating activities included $3.5
million provided by discontinued operations. This increase was partially offset by a net loss for the period of $6.6
million. Cash used by investing activities of $1.8 million was the result of additions to intangibles of $2.0 million,
which included the payment of $1.0 million for product rights, additions to property and equipment of $0.1 million
and partially offset by proceeds from the surrender of life insurance of $0.5 million. Our financing activities
included a net repayment of $3.5 million under our line of credit net, $1.9 million in cash used to repurchase shares
of our common stock as well as the $0.8 million used for the repurchase of a portion of CET's shares.

The net $0.3 million increase in cash and cash equivalents for the year ended December 31, 2019 was
attributable to cash provided by operating and investing activities offset by cash used in financing activities. Cash
provided by operating activities of $3.1 million included non-cash expense add backs for depreciation and
amortization and share-based compensation expense totaling $5.9 million. The cash provided by operating activities
included $5.5 million provided by discontinued operations. These increases were partially offset by a net loss for
the period of $3.5 million. Changes in our working capital provided net cash of $1.6 million. Cash provided by
investing activities of $2.3 million included net sales of marketable securities of $8.3 million, partially offset by the
$5 million payment to Theravance as part of the acquisition of Vibativ and the addition to intangibles of $0.8
million. Our financing activities included a net repayment of $1.5 million under our line of credit net and $3.5
million in cash used to repurchase shares of our common stock.

Shelf Registration

In November 2017, the Company filed its Shelf Registration on Form S-3 with the SEC associated with the sale
of up to $100 million in corporate securities. The Shelf Registration was declared effective in January 2018. It also
included an At the Market ("ATM") feature that allows the Company to sell common shares at market prices, along
with an agreement with B. Riley FBR Inc. 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. 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 this ATM during the year ended December 31, 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 amended the At the
Market Sales Agreement on December 27, 2021, in order to allow the Company to continue using its ATM feature
to sell shares at market prices. The Company intends to continue an ATM feature through B. Riley FBR, Inc. which
allows the Company to issue shares of its common stock.

Debt Agreement

On December 31, 2021, the Company entered into a Fifth Amendment (“Fifth Amendment”) to the Revolving
Credit Note and Sixth Amendment to Revolving Credit Loan Agreement with Pinnacle Bank (the Pinnacle
Agreement). The Fifth Amendment increased the principal amount by $5 million to $20 million. On October 28,
2021, the Company entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment to
Revolving Credit Loan Agreement with Pinnacle Bank. Among other terms, the Fourth Amendment extended the
maturity date to October 1, 2024.

Under the Pinnacle Agreement, we were initially subject to one financial covenant, the maintenance of a Funded
Debt Ratio. On August 14, 2018, we amended the Pinnacle Agreement ("First Amendment") to replace the single
financial covenant with the maintenance of either the Funded Debt Ratio or a Tangible Capital Ratio, as defined in
the First Amendment. The Third Amendment modified the definition of the Funded Debt Ratio and the compliance
target of the Tangible Capital Ratio. Both Third Amendment modifications were related to the Vibativ transaction.
We were in compliance with the Tangible Capital Ratio financial covenant as of December 31, 2021 and we expect
to maintain compliance with the Tangible Capital Ratio financial covenant in future periods.

Paycheck Protection Program

On April 20, 2020, Cumberland received the funding of a loan from Pinnacle Bank in the aggregate amount of
$2,187,140 pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief,
and Economic Security Act ("CARES Act"), which was enacted March 27, 2020.

Cumberland elected to account for the proceeds of the loan as a government grant under International
Accounting Standard 20 ("IAS 20"), Accounting for Government Grants and Disclosure of Government Assistance.
The permitted analogous use of IAS 20 outlines a model for the accounting for government assistance, including
forgivable loans. As a result, the Company recorded the $2,187,140 as a deferred income liability, which was
included as a component of other current liabilities on the condensed consolidated balance sheet at December 31,
2020.

In October 2020, Cumberland submitted a request for the loan’s forgiveness. On June 11, 2021, the Company
received a formal notice from the SBA that the full amount of the loan was forgiven. The Company accounted for
the forgiveness of the PPP loan under IAS 20 and recorded the $2,187,140 as other income.

Minimum Product Purchase Requirements

Our manufacturing and supply agreements do not require minimum annual purchase obligations.

Contractual cash obligations

The following table summarizes our contractual cash obligations as of December 31, 2021:

Contractual obligations(1)

Total

2022

2023

2024

2025

2026 and
thereafter

Payments Due by Year

$ 15,000,000 $

— $

— $ 15,000,000 $

— $

1,505,625

547,500

410,625

—

6,515,627

2,353,789

727,489

636,761

469,455

2,328,133

13,500,000

—

5,814,448

1,071,480

1,746,534

1,200,082

375,267

1,421,085

1,111,791

1,019,313

92,478

—

$ 43,447,491 $ 18,492,082 $ 3,114,001 $ 17,247,468 $ 844,722 $ 3,749,218

Line of credit(2)
Estimated interest on
debt (2)
Vibativ contingent
consideration liability
payments (3)
Sancuso upfront
purchase payment
Sancuso contingent
consideration liability
payments (4)
Operating leases(5)

Total (1)

The sum of the individual amounts may not agree due to rounding.

The line of credit payments represent the estimated unused line of credit payments and the amount due at maturity. The
estimated interest on debt represents the interest on the principal outstanding on the line of credit. These amounts are
based on the $15.0 million line of credit assuming the current $15.0 million balance outstanding on December 31, 2021
is consistently outstanding through maturity of October 2024. Interest and unused line of credit payments are due and
payable quarterly in arrears.

The contingent consideration liability represents the fair value of the royalty payments of up to 20% of future net sales
as part of the Vibativ acquisition.

The contingent consideration liability represents the fair value of the royalty payments of up to 10% of future net sales
as part of the Sancuso acquisition.

The Broadwest contractual cash obligation will begin upon commencement in Q4 2022.

OFF-BALANCE SHEET ARRANGEMENTS

During 2021, 2020 and 2019, we did not engage in any off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements - Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses,” which changes the
impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-
maturity debt securities, loans and other instruments, companies will be required to use a new forward-looking
“expected loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-
sale debt securities with unrealized losses, companies will measure credit losses in a manner similar to what they do
today, except that the losses will be recognized as allowances rather than as reductions in the amortized cost of the
securities. Companies will have to disclose additional information, including information they use to track credit
quality by year of origination for most financing receivables. Companies will apply the ASU’s provisions as a
cumulative-effect adjustment, if any, to retained earnings as of the beginning of the first reporting period in which
the guidance is adopted.

Related to ASU No. 2016-13 discussed above, in May 2019, the FASB issued ASU 2019-05, "Financial
Instruments-Credit Losses (Topic 326): Targeted Transition Relief" which provides transition relief for ASU
2016-13 by providing entities with an alternative to irrevocably electing the fair value option for eligible financial
assets measured at amortized cost upon adoption of the new credit losses standard. Certain eligibility requirements
must be met and the election must be applied on an instrument-by-instrument basis. The election is not available for
either available-for-sale or held-to-maturity debt securities. We will adopt both ASU 2016-13 and ASU 2019-05 on
January 1, 2023. The adoption of ASU 2016-13 and ASU 2019-05 are not expected to have a material impact on the
Company’s consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates on our cash on deposit in highly-liquid money
market accounts and revolving credit facility. We do not utilize derivative financial instruments or other market risk-
sensitive instruments to manage exposure to interest rate changes. The main objective of our cash investment
activities is to preserve principal while maximizing interest income through low-risk investments. Our investment
policy focuses on principal preservation and liquidity.

We believe that our interest rate risk related to our cash and cash equivalents is not material. The risk related to
interest rates for these accounts would produce less income than expected if market interest rates fall. Based on
current interest rates, we do not believe we are exposed to significant downside risk related to a change in interest on
our money market accounts. The Company did not have any investments in marketable securities at December 31,
2021.

The interest rate risk related to borrowings under our line of credit is based on LIBOR plus an interest rate
spread. There is no LIBOR minimum and the LIBOR pricing provides for an interest rate spread of 1.75% to 2.75%
(representing an interest rate of 3.65% at December 31, 2021). When the LIBOR rate is discontinued, the Pinnacle
Agreement allows for the LIBOR rate to be replaced by a Benchmark Rate, which may be the Daily Simple SOFR
(Secured Overnight Financing Rate). The Benchmark Rage will be determined in consultation with Pinnacle Bank.
As of December 31, 2021, we had $15.0 million in borrowings outstanding under our revolving line of credit.

Exchange Rate Risk

While we operate primarily in the U.S., we are exposed to foreign currency risk. A portion of our research and

development is performed abroad.

Currently, we do not utilize financial instruments to hedge exposure to foreign currency fluctuations. We
believe our exposure to foreign currency fluctuation is minimal as our purchases in foreign currency have a
maximum exposure of 90 days based on invoice terms with a portion of the exposure being limited to 30 days based
on the due date of the invoice. Foreign currency exchange losses were immaterial for 2021, 2020 and 2019. Neither
a five percent increase nor decrease from current exchange rates would have had a material effect on our operating
results or financial condition.

Item 8. Financial Statements and Supplementary Data.

See consolidated financial statements, including the reports of the independent registered public accounting

firm, starting on page F-1, which is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of
management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of
December 31, 2021. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer concluded
that, as of such date, our disclosure controls and procedures were effective (at the reasonable assurance level) to
ensure that the information required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules
and forms and to ensure that such information is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.

Management’s report on internal control over financial reporting is included on page F-1 of this annual report
on Form 10-K, and incorporated herein by reference. During our fourth quarter of 2021, there were no changes in

our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f))that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

The information called for by Part III of Form 10-K (Item 10 – Directors, Executive Officers and Corporate
Governance, Item 11 – Executive Compensation, Item 12 – Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters, Item 13 – Certain Relationships and Related Transactions, and
Director Independence, Item 14 – Principal Accountant Fees and Services), is incorporated by reference from our
proxy statement related to our 2022 annual meeting of shareholders, which is expected to be filed with the SEC on
or around March 11, 2022.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

a. Documents filed as part of this report:

1. Financial

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm – Consolidated
Financial Statements - BKD, LLP; Nashville, TN PCAOB ID: 686 and
BDO USA, LLP; Nashville, TN PCAOB ID : 243

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statements of Equity

Notes to the Consolidated Financial Statements

(2) Financial

Statement

Valuation and Qualifying Accounts

Exhibit
Number

Description

Statements

Page Number

F-1

F-6

F-8

F-10

F-11

F-42

Schedule

Exhibits

1.1

1.2

2.1

3.1

3.2

At Market Issuance Sales Agreement, dated November 7, 2017, by and between Cumberland
Pharmaceuticals Inc. and B. Riley FBR, Inc., incorporated herein by reference to the
corresponding Exhibit 1.1 of our Registration Statement on Form S-3 (File No. 333-221402)
as filed with the SEC on November 7, 2017.

Amendment No. 1 to At Market Issuance Sales Agreement, dated December 27, 2021, by and
between Cumberland Pharmaceuticals Inc. and B. Riley Securities, Inc., incorporated herein
by reference to the corresponding exhibit 1.2 of the Registrant’s Form 8-K (File No.
001-33637) as filed with the SEC on December 27, 2021

Asset Purchase Agreement, dated December 31, 2021, by and between Cumberland
Pharmaceuticals Inc. and Kyowa Kirin, Inc., incorporated herein by reference to the
corresponding exhibit 2.1 of the Registrant’s Form 8-K (File No. 001- 001-33637) as filed
with the SEC on January 6, 2022

Third Amended and Restated Charter of Cumberland Pharmaceuticals Inc., incorporated
herein by reference to the corresponding exhibit to Amendment No. 19 of the Registrant’s
Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC on July 17,
2009

Second Amended and Restated Bylaws of Cumberland Pharmaceuticals Inc., incorporated
herein by reference to the corresponding exhibit to Amendment No. 19 of the Registrant’s
Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC on July 17,
2009

4.1

4.2

4.3

4.4

4.5#

4.6.1#

4.6.2#

4.7#

4.8

4.9

4.10

4.11

10.7†

10.7.1†

10.10†

Specimen Common Stock Certificate of Cumberland Pharmaceuticals Inc., incorporated
herein by reference to the corresponding exhibit to Amendment No. 5 of the Registrant’s
Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC on August 6,
2007

Preferred Stock Terms, Rights, and Provisions, incorporated herein by reference to the
corresponding exhibit to Registrant's Registration Statement Form S-3 (File No. 333-221402)
as filed with the SEC on December 19, 2017

Form of Senior Indenture, incorporated herein by reference to the corresponding exhibit to
Registrant's Registration Statement Form S-3 (File No. 333-221402) as filed with the SEC on
November 7, 2017

Form of Subordinated Indenture, incorporated herein by reference to the corresponding exhibit
to Registrant's Registration Statement Form S-3 (File No. 333-221402) as filed with the SEC
on November 7, 2017

Form of Option Agreement under 1999 Stock Option Plan of Cumberland Pharmaceuticals
Inc., incorporated herein by reference to the corresponding exhibit to the Registrant’s
Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC on May 1,
2007

Form of Incentive Stock Option Agreement under the Amended and Restated 2007 Long-
Term Incentive Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein
by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K
(File No. 001-33637) as filed with the SEC on March 12, 2013

Form of Non-Statutory Stock Option Agreement under the Amended and Restated 2007 Long-
Term Incentive Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein
by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K
(File No. 001-33637) as filed with the SEC on March 12, 2013

Form of Non-Statutory Stock Option Agreement under the Amended and Restated 2007
Directors’ Compensation Plan of Cumberland Pharmaceuticals Inc. incorporated herein by
reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File
No. 001-33637) as filed with the SEC on March 12, 2013

Warrant to Purchase Common Stock of Cumberland Pharmaceuticals Inc., issued to Bank of
America, N.A. on July 22, 2009, incorporated herein by reference to the corresponding exhibit
to the Registrant’s Annual Report on Form 10-K (File No. 001-33637) as filed with the SEC
on March 19, 2010

Form of Senior Indenture, incorporated herein by reference to the corresponding exhibit to
Registrant's Registration Statement Form S-3 (File No. 333-184091) as filed with the SEC on
September 25, 2012.

Form of Subordinated Indenture, incorporated herein by reference to the corresponding exhibit
to Registrant's Registration Statement Form S-3 (File No. 333-184091) as filed with the SEC
on September 25, 2012

Description of Cumberland Pharmaceutical's Common Stock

Exclusive Distribution Agreement, effective as of July 1, 2010, by and between Cardinal
Health 105, Inc. and Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit of the Registrant’s Current Report on Form 8-K (File No. 001-33637)
as filed with the SEC on August 13, 2010

First Amendment to Exclusive Distribution Agreement, dated March 31, 2013, by and
between Cardinal Health 105, Inc. and Cumberland Pharmaceuticals Inc., incorporated herein
by reference to the corresponding exhibit of the Registrant's Current Report on Form 8-K (File
No. 001-33637) as filed with the SEC on June 3, 2013

License Agreement, dated May 28, 1999, by and between Vanderbilt University and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding
exhibit to Amendment No. 3 of the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on July 11, 2007

10.11#

10 .12#

10.13#

10.14#

10.15#

10.17#

10.18#

10.19#

10.20

10.21†

10.21.1†

10.21.2†

10.21.3†

10.23†

10.24

Employment Agreement dated March 8, 2021, effective as of January 1, 2021, by and between
A.J. Kazimi and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 8, 2021, effective as of January 1, 2021, by and between
Martin E. Cearnal and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 8, 2021, effective as of January 1, 2021, by and between
Leo B. Pavliv and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 8, 2021, effective as of January 1, 2021, by and between
John M. Hamm and Cumberland Pharmaceuticals Inc.

Employment Agreement dated March 8, 2021, effective as of January 1, 2021, by and between
James L. Herman and Cumberland Pharmaceuticals Inc.

1999 Stock Option Plan of Cumberland Pharmaceuticals Inc., incorporated herein by reference
to the corresponding exhibit to the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on May 1, 2007

Amended and Restated 2007 Long-Term Incentive Compensation Plan of Cumberland
Pharmaceuticals Inc., incorporated herein by reference to Appendix A of the Registrant’s
Schedule 14A as filed with the SEC on March 12, 2012 and approved by the Registrant's
shareholders on April 17, 2012

Amended and Restated 2007 Directors’ Incentive Plan of Cumberland Pharmaceuticals Inc.,
incorporated herein by reference to Appendix B of the Registrant's Schedule 14A as filed with
the SEC on March 12, 2012 and approved by the Registrant's shareholders on April 17, 2012

Form of Indemnification Agreement between Cumberland Pharmaceuticals Inc. and all
members of its Board of Directors, incorporated herein by reference to the corresponding
exhibit to the Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed
with the SEC on May 1, 2007

Lease Agreement, dated September 10, 2005, by and between Nashville Hines Development,
LLC and Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit to Amendment No. 3 of the Registrant’s Registration Statement on
Form S-1 (File No. 333-142535) as filed with the SEC on July 11, 2007

First Amendment to Office Lease Agreement, dated April 25, 2008, by and between 2525
West End, LLC (successor in interest to Nashville Hines Development LLC) and Cumberland
Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit to
Amendment No. 10 of the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on May 21, 2008

Second Amendment to Office Lease Agreement, dated March 2, 2010, by and between 2525
West End, LLC (successor in interest to Nashville Hines Development LLC) and Cumberland
Pharmaceuticals Inc., incorporated herein by reference to the corresponding exhibit to the
Registrant’s Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC on
May 17, 2010

Third Amendment to Office Lease Agreement, dated September 29, 2015, by and between
2525 West End, LLC (successor in interest to Nashville Hines Development LLC) and
Cumberland Pharmaceuticals Inc., incorporated herein by reference to the corresponding
exhibit to the Registrant's Quarterly Report on Form 10-Q (File No. 001-33637) as filed with
the SEC on November 6, 2015

Amended and Restated Lease Agreement, dated November 11, 2004, by and between The
Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc., incorporated herein
by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form
S-1 (File No. 333-142535) as filed with the SEC on May 1, 2007

First Amendment to Amended and Restated Lease Agreement, dated August 23, 2005, by and
between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration
Statement on Form S-1 (File No. 333-142535) as filed with the SEC on May 1, 2007

10.24.1

10.24.2†

10.25†

10.28†

10.30#

10.31†

10.32†

10.34

10.35

10.36

10.37

10.38#

10.39#

Second Amendment to Amended and Restated Lease Agreement, dated January 9, 2006, by
and between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to Amendment No. 10 of the
Registrant’s Registration Statement on Form S-1 (File No. 333-142535) as filed with the SEC
on May 21, 2008

Third Amendment to Amended and Restated Lease Agreement, dated July 3, 2012, by and
between The Gateway to Nashville LLC and Cumberland Emerging Technologies, Inc.,
incorporated herein by reference to the corresponding exhibit to the Registrant's Quarterly
Report on Form 10-Q (File No. 001-33637) as filed with the SEC on August 9, 2012

License and Supply Agreement, dated November 16, 2015, by and between Cumberland
Pharmaceuticals Inc. and Gastro-Entero Logic, LLC incorporated herein by reference to the
corresponding exhibit of the Registrant's Annual Report on Form 10-K (File No. 001-33637)
as filed with the SEC on March 14, 2016

Asset Purchase and Royalty Agreement for Kristalose dated November 15, 2011 by and
between Mylan Inc. and Cumberland Pharmaceuticals Inc., incorporated herein by reference
to the corresponding exhibit of the Registrant’s Current Report on Form 8-K (File No.
001-33637) as filed with the SEC on November 22, 2011

Supplemental Executive Retirement and Savings Plan, incorporated herein by reference to the
corresponding exhibit to the Registrant's Current Report on Form 8-K (File No. 001-33637) as
filed with the SEC on May 24, 2012

Settlement Agreement, dated November 9, 2012, by and between Cumberland
Pharmaceuticals Inc., Paddock Laboratories, LLC and Perrigo Company incorporated herein
by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K
(File No. 001-33637) as filed with the SEC on March 12, 2013

License and Supply Agreement, dated November 9, 2012, by and between Cumberland
Pharmaceuticals Inc., Paddock Laboratories, LLC and Perrigo Company incorporated herein
by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K
(File No. 001-33637) as filed with the SEC on March 12, 2013

Revolving Credit Loan Agreement, dated July 31, 2017, by and between Cumberland
Pharmaceuticals Inc. and Pinnacle Bank incorporated herein by reference to the corresponding
exhibit to the Registrant's Quarterly Report on Form 10-Q (File No. 001-33637) as filed with
the SEC on November 8, 2017

Amendment to Revolving Credit Loan Agreement, by and between Pinnacle Bank and
Cumberland Pharmaceuticals Inc., dated August 14, 2018, incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report Form 10-Q (File No. 001-33637) as filed
with the SEC on August 14, 2018

First Amendment to Revolving Credit Note and Second Amendment to Revolving Credit
Loan Agreement, dated as of October 17, 2018, by and between Cumberland Pharmaceuticals
Inc. and Pinnacle Bank, incorporated herein by reference to Exhibit 10.1 to the Registrant's
Current Report on Form 8-K (File No. 001-33637) as filed with the SEC on October 19, 2018

Second Amendment to Revolving Credit Note and Third Amendment to Revolving Credit
Loan Agreement, dated as of May 10, 2019, by and between Cumberland Pharmaceuticals Inc.
and Pinnacle Bank, incorporated herein by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q (File No. 001-336371) as filed with the SEC on May 15,
2019.

Amendment Number 2 to the Amended and Restated 2007 Long-Term Incentive Plan,
incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form
10-Q (File No. 001-33637) as filed with the SEC on August 14, 2020

Amendment Number 2 to the Amended and Restated 2007 Directors’ Incentive Compensation
Plan, incorporated herein by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on
Form 10-Q (File No. 001-33637) as filed with the SEC on August 14, 2020

10.40

10.41

10.42

10.43

10.44

Payment Protection Program Note dated April 20, 2020, by and between Cumberland
Pharmaceuticals Inc. and Pinnacle Bank, incorporated herein by reference to Exhibit 10.3 of
the Registrant’s Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC
on August 14, 2020

Third Amendment to Revolving Credit Note and Fourth Amendment to Revolving Credit
Loan Agreement, dated as of October 7, 2020, by and between Cumberland Pharmaceuticals
Inc. and Pinnacle Bank, incorporated herein by reference to Exhibit 10.1 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC on November 13,
2020

Fourth Amendment to Revolving Credit Note and Fifth Amendment to Revolving Credit Loan
Agreement, dated as of October 28, 2021, by and between Cumberland Pharmaceuticals Inc.
and Pinnacle Bank, incorporated herein by reference to Exhibit 10.1 of the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-33637) as filed with the SEC on November 12,
2021

Fifth Amendment to the Revolving Credit Note and Sixth Amendment to Revolving Credit
Loan Agreement, dated as of December 31, 2021, by and between Cumberland
Pharmaceuticals Inc. and Pinnacle Bank

Lease Agreement, dated November 15, 2021, by and between Cumberland Pharmaceuticals
Inc. and 1600 West End Avenue Partners, LLC.

23.1

23.2

31.1

31.2

32.1**

101.INS

Subsidiaries of Cumberland Pharmaceuticals Inc., incorporated herein by reference to the
corresponding exhibit to the Registrant’s Registration Statement on Form S-1 (File No.
333-142535) as filed with the SEC on May 1, 2007

Consent of BDO USA, LLP

Consent of BKD, LLP

Certification of Chief Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

104

Cover 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.

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 11, 2022.

SIGNATURES

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.

Signature

Title

Date

/s/ A. J. Kazimi
A. J. Kazimi

/s/ John M. Hamm
John M. Hamm

/s/ Martin E. Cearnal
Martin E. Cearnal

/s/ Gordon R. Bernard
Gordon R. Bernard

/s/ James R. Jones
James R. Jones

/s/ Joey A. Jacobs
Joey A. Jacobs

/s/ Caroline R. Young
Caroline R. Young

/s/ Kenneth J. Krogulski
Kenneth J. Krogulski

/s/ Joseph C. Galante
Joseph C. Galante

March 11, 2022

Chairman and CEO
(Principal Executive Officer and
Director)

Senior Director and CFO
(Principal Financial and
Accounting Officer

Director

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, 2021. 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, 2021, 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 11, 2022

/s/ John M. Hamm
John M. Hamm
Chief Financial Officer
March 11, 2022

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee
Cumberland Pharmaceuticals Inc.
Nashville, Tennessee

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cumberland Pharmaceuticals Inc. (Company) as
of December 31, 2021 and 2020, and the related consolidated statements of operations, equity, and cash flows for
each of the years in the two-year period ended December 31, 2021, and the related notes and schedule listed in the
accompanying index (collectively referred to as the “financial statements”). In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-
year period ended December 31, 2021, 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 audits 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 include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit
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 Matters

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.

F-2

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 financial statements, revenues from product sales are recorded net of estimated
allowances for chargebacks, discounts and damaged goods and reflects sales-related accruals for rebates, coupons,
product returns, and certain fees. These allowances and accruals are determined on a product-by-product basis, and
are 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. Management reviews these
allowances on an ongoing basis and adjusts them based on the most recent information available, including actual
results since the end of the reporting period. As of December 31, 2021, allowances in accounts receivable for
chargebacks, cash discounts, and damaged goods were $0.3 million and the estimated liability for rebates, coupons,
product returns, and certain fees were $3.7 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.

The principal consideration for our determination that performing procedures relating to these allowances and
accruals is a critical audit matter was the significant judgment by management to estimate the reserves due to the
significant measurement uncertainty involved in developing the reserves. Management tracks the various types of
allowances on several different schedules, each of which relates to different contracts agreed to with various
customers or the interplay with government payors. 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.

We identified the estimated sales allowances and accruals as a critical audit matter.

The primary procedures we performed to address this critical audit matter included:

•

Testing of management’s process for calculating the allowances, including a look back analysis of prior
year reserves compared to actual experience in the current year.

Testing completeness and accuracy of underlying data used to estimate the accrual by agreeing sales data
used in the calculations to reports that were reconciled to the financial statements, reconciling various
allowance percentages to signed customer contracts, tracing allowance amounts used by various customers
during the year to supporting documentation.

Evaluating 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 the future allowances to be claimed.

Testing the clerical accuracy of individual customer allowances computed by management and agreeing the
total of all estimated allowances to the respective accounts on the financial statements.

• Developing our own independent expectation of the reserve balance for certain allowances and comparing

that to the balance recorded on the December 31, 2021 balance sheet.

F-3

•

Comparing actual allowances reported after December 31, 2021 to estimated reserves and accruals on the
December 31, 2021 balance sheet.

/s/ BKD, LLP

We have served as the Company's auditor since 2020.

Nashville, Tennessee
March 11, 2022

F-4

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors
Cumberland Pharmaceuticals Inc.
Nashville, Tennessee

Opinion on the Consolidated Financial Statements

We have audited the accompanying the consolidated statements of operations, equity and cash flows of Cumberland
Pharmaceuticals Inc. (the Company) for the year ended December 31, 2019 and the related notes and financial
statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results
of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit 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 consolidated 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 audit 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 consolidated 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 consolidated financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audit provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We served as the Company's auditor from 2017 to 2020.

Nashville, Tennessee
March 20, 2020, except for the effects of presenting discontinued operations as discussed in Note 19, as to which the
date is December 10, 2020.

F-5

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2021 and 2020

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

Other current liabilities

Total current liabilities

Revolving line of credit

Operating lease non-current liabilities

Other long-term liabilities

Total liabilities

Commitments and contingencies

Equity:

Shareholders’ equity:

2021

2020

27,040,816 $

24,753,796

6,877,346

8,429,882

3,339,969

45,688,013

9,048,567

442,635

12,377,713

10,638,157

2,199,926

49,969,592

11,656,742

574,169

23,954,475

28,118,316

882,000

1,024,200

3,419,908

882,000

2,028,148

3,234,338

84,459,798 $

96,463,305

9,640,980 $

13,396,286

969,677

8,668,303

19,278,960

15,000,000

90,016

7,488,844

41,857,820

1,016,779

11,254,381

25,667,446

15,000,000

1,059,693

7,862,772

49,589,911

Common stock – no par value; 100,000,000 shares authorized;
14,742,754 and 14,988,429 shares issued and outstanding as of
December 31, 2021 and 2020, respectively

Retained earnings (deficit)

Total shareholders’ equity

Noncontrolling interests

Total equity

Total liabilities and equity

48,452,906

49,121,523

(5,638,600)

(2,131,013)

42,814,306

46,990,510

(212,328)

(117,116)

42,601,978

46,873,394

84,459,798 $

96,463,305

See accompanying notes to consolidated financial statements.

F-6

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2021, 2020 and 2019

Revenues:

Net product revenue

Other revenue

Net revenues

Costs and expenses:

Cost of products sold

Selling and marketing

Research and development

General and administrative

Amortization

Total costs and expenses

Operating income (loss)

Interest income

Other income

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss) from continuing operations

Discontinued operations net of tax

Net income (loss)

2021

2020

2019

$ 35,045,259 $ 35,840,673 $ 32,407,845

939,784

1,600,461

1,980,450

35,985,043

37,441,134

34,388,295

8,811,248

8,653,020

7,421,316

15,015,424

14,765,465

15,277,740

5,684,465

9,780,026

4,371,300

5,773,825

10,196,299

4,434,120

6,868,480

9,974,384

4,134,557

43,662,463

43,822,729

43,676,477

(7,677,420)

(6,381,595)

(9,288,182)

26,081

2,187,140

75,345

—

243,364

—

(98,031)

(263,627)

(246,186)

(5,562,230)

(6,569,877)

(9,291,004)

(34,891)

(55,902)

79,316

(5,597,121)

(6,625,779)

(9,211,688)

1,994,322

3,206,875

5,665,177

(3,602,799)

(3,418,904)

(3,546,511)

Net loss at subsidiary attributable to noncontrolling interests

95,212

79,496

8,752

Net income (loss) attributable to common shareholders

(3,507,587) $

(3,339,408) $

(3,537,759)

Earnings (loss) per share attributable to common shareholders:

-Continuing operations-basic

-Discontinued operations-basic

Basic

-Continuing operations-diluted

-Discontinued operations-diluted

Diluted

Weighted-average common shares outstanding:

Basic

Diluted

(0.37) $

(0.43) $

0.13

0.21

(0.24) $

(0.22) $

(0.37) $

(0.43) $

0.13

0.21

(0.24) $

(0.22) $

(0.60)

0.37

(0.23)

(0.60)

0.37

(0.23)

14,904,834

15,162,184

15,396,098

14,904,834

15,162,184

15,396,098

See accompanying notes to consolidated financial statements.

F-7

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2021, 2020 and 2019

Cash flows from operating activities:

Net income (loss)

Discontinued operations

Net income (loss) from continuing operations

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

Depreciation and amortization expense

Deferred tax expense

Share-based compensation

Decrease in non-cash contingent consideration

Write off of deferred offering costs
Increase in cash surrender value of life insurance policies over
premiums paid
Noncash interest expense

Noncash investment gains

Gain on forgiveness of debt

Net changes in assets and liabilities affecting operating activities:

Accounts receivable

Inventories

Other current assets and other assets

Accounts payable and other current liabilities

Other long-term liabilities

Net cash provided by (used in) operating activities from
continuing operations
Discontinued operations
Net cash provided by operating activities

Cash flows from investing activities:

Additions to property and equipment

Additions to intangible assets

Proceeds from surrender of life insurance policies

Premiums paid for life insurance policies

Cash paid for acquisition

Note receivable investment funding

Proceeds from sale of marketable securities

Purchases of marketable securities

2021

2020

2019

(3,602,799) $

(3,418,904) $

(3,546,511)

1,994,322

3,206,875

5,665,177

(5,597,121)

(6,625,779)

(9,211,688)

4,606,366

4,748,565

4,404,175

—

21,802

65,408

741,867

1,046,516

1,485,898

(1,147,750)

(1,160,202)

(804,167)

—

440,091

(282,207)

(154,611)

47,636

—

47,525

(26,315)

—

34,053

—

(2,187,140)

5,500,367

4,816,450

(35,568)

(757,591)

(4,518,707)

(1,399,012)

2,131,347

1,210,489

6,569,002

1,106,175

(615,199)

3,221,780

(1,343,605)

(1,859,330)

(729,820)

4,348,121
1,994,322
6,342,443

1,896,819
3,518,242
5,415,061

(2,455,240)
5,511,596
3,056,356

(103,532)

(250,930)

85,944

(33,375)

—

(200,000)

—

(140,817)

(1,973,110)

460,888

(104,750)

—

(246,202)

(772,944)

—

—
(5,000,000)

—

20,062,132

(11,745,138)

Net cash provided by (used in) investing activities

(501,893)

(1,757,789)

2,297,848

F-8

Cash flows from financing activities:

Borrowings on line of credit

Payments on line of credit

Payments made in connection with repurchase of common shares

Cash settlement of contingent consideration

Repurchase of subsidiary shares from noncontrolling interest

Sale of subsidiary shares to noncontrolling interest

Payments of deferred equity offering costs

Payments of deferred financing costs

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

2021

2020

2019

59,000,000

76,000,000

(59,000,000)

(62,500,000)

(77,500,000)

(1,386,849)

(1,851,526)

(3,494,921)

(2,166,681)

(819,180)

(1,033,108)

—

(800,000)

—

1,000,000

(135,405)

(10,000)

—

(52,500)

(3,553,530)

(7,116,111)

(5,080,529)

2,287,020

(3,458,839)

273,675

24,753,796

28,212,635

27,938,960

$ 27,040,816 $ 24,753,796 $ 28,212,635

Supplemental disclosure of cash flow information:

Net cash paid (refunded) during the year for:

Interest

Income taxes

Noncash investing and financing activities:

63,978 $

215,991 $

198,661

(327)

(91,486)

16,694

Change in unpaid invoices for intangible asset additions

(43,471) $

(340,997) $

(576,837)

Change in unpaid invoices for offering costs

Noncash increase in liabilities related to other asset

Recognition of operating lease assets and liabilities through adoption
of ASC 842
Vesting of shares related to RediTrex approval

Repurchase of subsidiary shares from noncontrolling interests

Additions to intangible assets from final purchase price allocation

(90,512)

—

—
—

—

200,000

—

—
—

3,629,320

862,200

(800,000)
148,000

See accompanying notes to consolidated financial statements

F-9

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Equity

Years ended December 31, 2021, 2020 and 2019

Cumberland Pharmaceuticals Inc.
Shareholders

Common stock

Amount

Retained
earnings
(deficit)

Non-
controlling
interest

Total equity

Balance, December 31, 2018

15,481,497 $ 51,098,613 $ 4,746,154 $

(274,266) $ 55,570,501

—

(3,537,759)

(8,752)

(3,546,511)

Net income (loss)
Repurchase of subsidiary
shares to noncontrolling
interest
Sale of subsidiary shares to
noncontrolling interest

Vesting of common stock

Share-based compensation
Repurchase of common
shares

—

180,000

225,536

(685,805)

640,407

862,200

1,485,898

(623,478)

(3,486,835)

—

(114,195)

(800,000)

359,593

1,000,000

—

862,200

1,485,898

(3,486,835)

Balance, December 31, 2019

15,263,555 $ 49,914,478 $ 1,208,395 $

(37,620) $ 51,085,253

Net income (loss)

Share-based compensation
Repurchase of common
shares

—

(3,339,408)

(79,496)

(3,418,904)

228,500

1,046,516

(503,626)

(1,839,471)

—

1,046,516

(1,839,471)

Balance, December 31, 2020

14,988,429 $ 49,121,523 $ (2,131,013) $

(117,116) $ 46,873,394

Net income (loss)

Share-based compensation
Repurchase of common
shares

—

(3,507,587)

(95,212)

(3,602,799)

192,684 $

741,867 $

— $

(438,359) $ (1,410,484) $

— $

—

741,867

(1,410,484)

Balance, December 31, 2021

14,742,754 $ 48,452,906 $ (5,638,600) $

(212,328) $ 42,601,978

See accompanying notes to consolidated financial statements

F-10

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Organization

Cumberland Pharmaceuticals Inc. (“Cumberland,” the “Company,” or as used in the context of “we,” “us,” or
“our”) is a specialty pharmaceutical company focused on the acquisition, development and commercialization of
branded prescription products. The Company's primary target markets are hospital acute care, gastroenterology,
rheumatology and oncology. These medical specialties are characterized by relatively concentrated prescriber bases
that the Company believes can be penetrated effectively by small, targeted sales forces. Cumberland is dedicated to
providing innovative products that improve quality of care for patients and address unmet or poorly met medical
needs. The Company promotes its approved products through its hospital, field and oncology sales forces in the
United States and is establishing a network of international partners to bring its medicines to patients in their
countries.

Cumberland focuses its resources on maximizing the commercial potential of its products, as well as developing
new product candidates, and has both internal development and commercial capabilities. The Company’s products
are manufactured by third parties, which are overseen by Cumberland’s quality and manufacturing professionals.
The Company works closely with its third-party distribution partners to make its products available in the United
States.

In order to build a pipeline of early-stage product candidates, the Company formed a subsidiary, Cumberland
Emerging Technologies, Inc. ("CET"), which teams with universities and other research organizations to help
advance scientific discoveries from the laboratory to the marketplace. In 2014, the Company organized equity
financing to recapitalize and strengthen the financial position of CET including an investment of approximately $1.0
million from Gloria Pharmaceuticals Co., Ltd. (“Gloria”). As a result, Gloria received shares in CET and joined the
CET ownership group.

In April, 2019, CET entered into an agreement with HongKong WinHealth Pharma Group Co. Limited
(WinHealth) whereby WinHealth made a $1.0 million investment through the purchase of shares of CET stock. As
part of the agreement, WinHealth obtained a Board position at CET and the first opportunity to license CET
products for the Chinese market. In connection with WinHealth's investment in CET, Cumberland also made an
additional $1.0 million investment in CET. Cumberland purchased additional CET shares through contribution of
$0.3 million in cash and a conversion of $0.7 million in intercompany loans payable. Upon completion of the
additional investment by WinHealth and Cumberland, Gloria Pharmaceuticals returned its shares in CET in
exchange for $0.8 million that was funded during 2020.

The Company's ownership in CET is now 85%. While the remaining interest is owned by WinHealth,
Vanderbilt University and the Tennessee Technology Development Corporation. The operating results of CET
allocated to noncontrolling interests in the consolidated statements of operations were $95,212, $79,496 and $8,752
for the years ended December 31, 2021, 2020 and 2019, respectively.

Effective January 1, 2007, the Company formed a wholly-owned subsidiary, Cumberland Pharma Sales Corp.

("CPSC"). CPSC is the subsidiary that employs the Company's hospital and field sales force personnel.

F-11

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company are stated in U.S. dollars and are prepared using U.S.
generally accepted accounting principles. These financial statements include the accounts of the Company and its
wholly and majority-owned subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation.

COVID-19 Pandemic

In early 2020, the U.S. declared a health care emergency following the outbreak of SARS-CoV-2, a novel strain
of coronavirus that causes COVID-19, a respiratory illness. The Company has managed through the resulting
COVID-19 pandemic, continuing to operate our business – keeping facilities open and our organization intact. We
moved quickly to ensure the health and safety of our team. We also maintained our ongoing compliance with the
many laws and regulations that apply to us as a publicly traded pharmaceutical company.

Throughout the pandemic, Cumberland faced the same challenges affecting other companies that rely on
hospital admissions and patient visits to drive revenue. Our business and our clinical studies were impacted, as fewer
patients sought elective surgeries and our access to medical facilities was substantially limited. We carefully
monitored our supply chain, including the flow of raw materials and the batches of finished products emerging from
the facilities that manufacture our products.

Several of our brands were negatively impacted by the lockdowns and postponement of physician office visits
and elective procedures. However, we are fortunate to have a diversified product portfolio that includes other brands
that have delivered a strong performance during the pandemic. Overall, we have been able to continue the delivery
of our products while addressing the interests of our shareholders, employees, partners and community.

Cumberland relies on third-party organizations around the world to supply components, manufacture and
distribute its products. The Company is aware that it may experience revenue loss, supply interruptions, time delays
and incur unplanned expenses as a result of the impact of the ongoing COVID-19 pandemic. The Company
continues to monitor the COVID-19 pandemic situation both in the U.S. and internationally in order to maintain the
employees’ safety and well-being, while also keeping its business operating. Given the uncertainty, magnitude and
impact of such changes, the Company is unable to quantify the impact on the future results as of the date of this
filing.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management of the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates
under different assumptions and conditions. The Company's most significant estimates include: (1) its allowances
for chargebacks and accruals for rebates and product returns (2) the allowances for obsolescent or unmarketable
inventory and (3) valuation of contingent consideration liability associated with business combinations.

F-12

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Segment Reporting

The Company has one operating segment which is specialty pharmaceutical products. Management has chosen
to organize the Company based on the type of products sold. Operating segments are identified as components of an
enterprise about which separate discrete financial information is evaluated by the chief operating decision maker, or
decision-making group, in making decisions regarding resource allocation and assessing performance. The
Company, which uses consolidated financial information in determining how to allocate resources and assess
performance, evaluated that our specialty pharmaceutical products compete in similar economic markets and similar
circumstances. Substantially all of the Company’s assets are located in the United States. Total revenues are
primarily attributable to U.S. customers. Net revenues from customers outside the United States were approximately
$2.2 million, $2.4 million and $1.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Fair Value of Financial Instruments

Fair value of financial assets and liabilities is the price the Company would receive to sell an asset or pay to
transfer a liability in an orderly transaction with a market participant at the measurement date. The Company's fair
value measurements follow the appropriate rules as well as the fair value hierarchy that prioritizes the information
used to develop the measurements. It applies whenever other guidance requires (or permits) assets or liabilities to be
measured at fair value and gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

A summary of the fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair

value into three broad levels is described below:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations whose inputs are
observable or whose significant value drivers are observable.

Level 3 - Significant inputs to the valuation model are unobservable.

We maintain policies and procedures to value instruments using the best and most relevant data available. The
following section describes the valuation methodologies we use to measure different financial instruments at fair
value on a recurring basis.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable,
accrued liabilities, contingent consideration liability and a revolving line of credit. The carrying values for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to
their short-term nature. The revolving line of credit has a variable interest rate, which approximates the current
market rate.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less. As

of December 31, 2021 and 2020, cash equivalents consist primarily of money market funds.

F-13

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. The Company records allowances for amounts
that could become uncollectible in the future based on historical experience, as well as amounts related to
chargebacks and cash discounts. The Company reviews each customer balance to assess collection status.

The majority of the Company’s products are distributed through independent pharmaceutical wholesalers. The
allowances against accounts receivable for chargebacks and discounts 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 and discounts. The allowances in accounts receivable for chargebacks and cash discounts were $0.3
million at December 31, 2021 and $1.0 million at December 31, 2020.

Other organizations, such as managed care providers, pharmacy benefit management companies and
government agencies, may receive rebates from the Company based on either negotiated contracts to carry the
Company’s products or reimbursements for filled prescriptions. These entities are considered indirect customers of
the Company. In conjunction with recognizing a sale to a wholesaler, revenues are reduced and accrued liabilities
are increased by the Company’s estimate of the rebate that may be claimed. Cash discounts are reductions to
invoiced amounts offered to customers for payment within a specified period of time from the date of the invoice.

Inventories

The Company works closely with third parties to manufacture and package finished goods for sale. Based on
the customer relationship with the manufacturer or packager, the Company will either take title to finished goods at
the time of shipment or at the time of arrival from the manufacturer. The Company then warehouses such goods
until distribution and sale at third party facilities. Periodic inventory counts are made by the warehouse teams and
by the Company on a regular basis. In addition, the Company re-tests API inventory prior to use to confirm product
expiration. Inventories are stated at the lower of cost or net realizable value with cost determined using the first-in,
first-out method.

The Company continually evaluates inventories for potential losses due to expired, short-dated or slow-moving
inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates the
carrying value of a product may not be recoverable, a charge is recorded to reduce the inventory to its current net
realizable value. The Company classifies the Vibativ inventories and ifetroban inventories that it does not expect to
sell within one year as non-current inventories.

Prepaid and Other Current Assets

Prepaid and other current assets consist of deferred offering costs, prepaid insurance premiums, prepaid
consulting services, deposits and annual fees paid to the U.S. Food and Drug Administration ("FDA"). The
Company expenses all prepaid and other current asset amounts as used or over the period of benefit primarily on a
straight-line basis, as applicable.

F-14

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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 has recorded deferred offering costs for payments directly related to the current Shelf
Registration on Form S-3 that was completed during December 2020 and 2021. These costs consist of legal and
accounting fees that the Company has capitalized. Deferred costs associated with the Shelf Registration will be
reclassified to additional paid in capital on a pro-rata basis as the Company completes sales of shares under the Shelf
Registration. The Company did not issue any shares under this ATM during the year ended December 31, 2021.
During the year ended December 31, 2020, the Company expensed $0.4 million in deferred offering costs associated
with the Shelf Registration that was declared effective in January 2018.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost. Depreciation is recognized using
the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over
the shorter of the initial lease term plus renewal options, if reasonably assured, or the remaining useful life of the
asset. Upon retirement or disposal of assets, any gain or loss is reflected as a component of operating income (loss)
in the consolidated statement of operations. Improvements that extend an asset’s useful life are capitalized. Repairs
and maintenance costs are expensed as incurred.

Intangible Assets and Goodwill

The Company’s intangible assets and goodwill consist of capitalized costs related to product and license rights,
patents, trademarks and goodwill obtained in the Vibativ acquisition. Goodwill is not amortized for financial
reporting purposes, but is subject to impairment analysis at least annually.

The cost of acquiring product and license rights are capitalized at fair value at the date of acquisition for
products that are approved by the FDA for commercial use. These costs are amortized ratably over the estimated
economic life of the product. The economic life is estimated based upon several factors. This includes the term of
the license agreement, the patent life or market exclusivity of the product and as well as management's expectations
of continued involvement with the product and the assessment of future sales, the future periods under which the
product will be sold and the profitability of the product. This estimate is evaluated on a regular basis during the
amortization period and adjusted if appropriate. If there are any changes made to the useful life of the product and
license rights, the costs associated with such a change, if any, will be capitalized and amortized over the revised
useful life.

Capitalized patent costs consist of outside legal costs associated with obtaining and protecting patents on
products that have been approved for marketing by the FDA. If it becomes probable that a patent will not be issued
or a patent has been declared invalid, related costs associated with the patent application are expensed at the time
such determination is made. All costs associated with obtaining patents for products that have not been approved for
marketing by the FDA are expensed as incurred.

Amortization expense is recognized ratably over the following periods:

Product rights
License rights
Patents

Estimated economic life
Term of license agreement
Life of patent

F-15

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, operating lease right-of-use assets and intangible assets
subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. If events or circumstances arise that require a long-lived asset
to be tested for potential impairment, the Company first compares undiscounted cash flows expected to be generated
by the asset to its carrying value. If the carrying amount of the long-lived asset is not recoverable on an
undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying value exceeds the
fair value. Fair value is determined through various valuation techniques including quoted market prices, third-party
independent appraisals and discounted cash flow models.

Goodwill and other indefinite lived intangible assets that are not subject to amortization are tested at least
annually for impairment. The impairment analysis for goodwill requires a comparison of fair value to the carrying
value of the reporting unit. The Company's goodwill was acquired in November 2018 with the Vibativ acquisition.
As a result, the Vibativ component of the Company is the reporting unit evaluated for goodwill impairment.
Cumberland determined the fair value of the reporting unit through current and future estimated revenue and
profitability of the product. The Company recorded no impairment charges during 2021, 2020 and 2019.

Joint Venture Agreement

In August 2020, Cumberland entered into an agreement with WinHealth Investment (Singapore) Ltd creating
WHC Biopharmaceuticals, Pte. Ltd. The joint venture, as a limited liability company, will focus on acquiring,
developing, registering, and commercializing development stage and commercial stage biopharmaceuticals for
China, Hong Kong and other Asian markets. The agreement provides for initial investment from WinHealth in the
form of a $0.2 million equity contribution and an initial investment from Cumberland in the form of $0.2 million
convertible note. The joint venture will seek additional future capital from additional investors and has entered into
exclusive option agreements to license intellectual property from both Cumberland Pharmaceuticals Inc. and
Cumberland Emerging Technologies.

Net Product Revenue

Revenues from product sales are recognized in the amount that reflects the consideration that we expect to
receive for these goods. Depending upon the shipping terms of the transaction, the revenue is recognized at the
point where the customer obtains control of the goods and we satisfy our performance obligation. This occurs upon
either shipment of the product or arrival at its ship to destination. Payment terms typically range from 30 to 60 days
from date of shipment. The Company’s net product revenue reflects the reduction from gross product revenue for
estimated allowances for chargebacks, discounts and damaged goods, and reflects sales related accruals for rebates,
coupons, product returns, and certain administrative and service fees. Significant judgments must be made in
determining the transaction price for our sales of products related to these adjustments.

Sales Rebates and Discounts

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.

Other organizations, such as managed care providers, pharmacy benefit management companies and
government agencies, may receive rebates from the Company based on either negotiated contracts to carry the
Company’s products or reimbursements for filled prescriptions. These entities are considered indirect customers of
the Company. In conjunction with recognizing a sale to a wholesaler, sales revenues are reduced and accrued
liabilities are increased by the Company’s estimate of the rebate that may be claimed.

F-16

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Sales Returns

Consistent with industry practice, the Company maintains a return policy that allows customers to return
product within a specified period prior to and subsequent to the expiration date. The Company’s estimate of the
provision for returns is based upon historical experience, expiration date by product as well as any other factor
expected to impact future returns. Any changes in the assumptions used to estimate the provision for returns are
recognized in the period those assumptions are changed.

Other Revenues

Other revenues primarily consist of income from grant funding programs, licensing agreements, leases and
contract services. Revenue related to grants is recognized when all conditions related to such grants have been met.
All other revenue is recognized when earned.

Cost of Products Sold

Cost of products sold consists principally of the cost to acquire each unit of product sold, including in-bound
freight expense as well as any adjustment in the net realizable value of inventory acquired in acquisitions. Cost of
products sold also includes expenses associated with the reduction in the net realizable value of slow-moving or
expired product.

Selling and Marketing Expense

Selling and marketing expense consists primarily of expenses relating to the advertising, promotion, distribution

and sale of products, including royalty expense, salaries and related costs.

Distribution Costs

Distribution costs are expensed as incurred and are included as a component of selling and marketing expenses

in the consolidated statements of operations. Distribution costs were as follows for the years ended December 31:

Distribution costs

806,311 $

890,686 $

613,637

2021

2020

2019

Advertising Costs

Advertising costs are expensed as incurred and are included as a component of selling and marketing expenses

in the consolidated statements of operations. Advertising costs were as follows for the years ended December 31:

Advertising costs

1,927,864 $

2,379,424 $

2,594,630

2021

2020

2019

Research and Development

Research and development costs are expensed in the period incurred. Research and development costs are
comprised mainly of clinical trial expenses, salaries, wages and other related costs such as materials and supplies.
Research and development expense includes activities performed by third-party providers participating in the
Company’s clinical studies. The Company accounts for these costs based on estimates of work performed, patients
enrolled or fixed fees for services over the period of time the clinical trials are performed.

F-17

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Income Taxes

The Company provides for deferred taxes using the asset and liability approach. Under this method, deferred tax
assets and liabilities are recognized for future tax consequences attributable to operating loss and tax credit
carryforwards, as well as differences between the carrying amounts of existing assets and liabilities and their
respective tax bases. The Company’s principal differences are related to the timing of deductibility of certain items,
such as inventory, depreciation, amortization and share-based compensation. Deferred tax assets and liabilities are
measured using enacted statutory tax rates that are expected to apply to taxable income in the years such temporary
differences are anticipated to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period of enactment. The Company only recognizes income tax benefits
associated with an income tax position in which it is “more likely than not” that the position would be sustained
upon examination by the taxing authorities.

In assessing the realizability of deferred tax assets, management considers whether some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of existing temporary differences, projected future taxable income and
tax planning strategies in making this assessment.

The Company’s accounting policy with respect to interest and penalties arising from income tax settlements is

to recognize them as part of the provision for income taxes.

Earnings (Loss) per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common shareholders
by the weighted-average number of shares outstanding. Except where the result would be antidilutive to income
from continuing operations, diluted earnings (loss) per share is calculated by assuming the vesting of unvested
restricted stock and the exercise of stock options and warrants and unrecognized compensation costs.

Share-Based Payments

The Company recognizes compensation cost for all share-based payments issued, modified, repurchased or
canceled. Depending on the nature of the vesting provisions, restricted stock awards are measured using either the
fair value on the grant date or the fair value of common stock on the date the vesting provisions lapse. Prior to the
lapse for those equity grants not valued on the grant date, the fair value is measured on the last day of the reporting
period.

Collaborative Agreements

The Company is a party to several collaborative arrangements with research institutions to identify and pursue
promising pharmaceutical product candidates. 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 discussed in Note 3 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. Except for patent
defense costs, expenses incurred by one party are not required to be reimbursed by the other party. Expenses
incurred under these collaborative agreements are included in research and development expenses and funding
received from grants are recorded as net revenues in the consolidated statements of operations.

Discontinued Operations

As discussed further in Note 20, during May 2019, Cumberland entered into a Dissolution Agreement
("Dissolution Agreement") with Clinigen Healthcare Limited ("Clinigen") in which the Company returned the
exclusive rights to commercialize Ethyol® and Totect® in the United States to Clinigen. Under the terms of the
Dissolution Agreement, Cumberland is no longer involved directly or indirectly with the distribution, marketing and

F-18

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

promotion of either Ethyol or Totect or any competing products following December 31, 2019. The Company's exit
from the products meets the accounting criteria to be reported as discontinued operations and the discontinued
operating results have been reclassified in the financial statements and footnotes for all periods presented to reflect
the discontinued status of these products. Refer to Note 20, for additional information.

Recent Accounting Guidance

Recent Accounting Pronouncements - Not Yet Adopted

Related to ASU No. 2016-13 discussed above, in May 2019, the FASB issued ASU 2019-05, "Financial
Instruments-Credit Losses (Topic 326): Targeted Transition Relief" which provides transition relief for ASU
2016-13 by providing entities with an alternative to irrevocably electing the fair value option for eligible financial
assets measured at amortized cost upon adoption of the new credit losses standard. Certain eligibility requirements
must be met and the election must be applied on an instrument-by-instrument basis. The election is not available for
either available-for-sale or held-to-maturity debt securities. The Company will adopt both ASU 2016-13 and ASU
2019-05 on January 1, 2023. The adoption of ASU 2016-13 and ASU 2019-05 are not expected to have a material
impact on the Company’s consolidated financial statements.

(3)

RediTrex® and Vibativ®

RediTrex

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 $0.1 million at closing. The Company provided
$0.9 million in consideration through a grant of 180,000 restricted shares of Cumberland common stock to be vested
upon the FDA approval of the first Nordic product. Cumberland also agreed to provide Nordic a series of payments
tied to the products’ FDA approval, launch and achievement of certain sales milestones. Under the terms of the
agreement, Cumberland is responsible for the product registration and commercialization in the U.S. Nordic is
responsible for product manufacturing and supply.

On November 27, 2019, Cumberland received FDA approval for the first Nordic injectable product and
authorization to market them under the RediTrex brand name. The 180,000 shares of restricted Cumberland
common stock previously provided to Nordic vested upon approval and were valued at $0.9 million on the vesting
date. The FDA approval also resulted in a $1.0 million milestone payment due to Nordic. This milestone payment
was paid in July 2020 and was recorded as an other current liability at December 31, 2019. During December 2020,
Cumberland began distributing RediTrex which also resulted in a $1.0 million milestone payment due to Nordic and
recorded in accounts payable at December 31, 2020. The full launch of RediTrex occurred in October 2021 and this
milestone payment will be paid during 2022.

Cumberland has approximately $2.6 million and $2.8 million in net intangible assets related to RediTrex at

December 31, 2021 and 2020, respectively.

F-19

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Vibativ

During November 2018, the Company closed on an agreement with Theravance Biopharma ("Theravance") to
acquire the global responsibility for Vibativ including the marketing, distribution, manufacturing and regulatory
activities associated with the brand. Vibativ is a patented, FDA approved injectable anti-infective for the treatment
of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and
complicated skin and skin structure infections. It addresses a range of Gram-positive bacterial pathogens, including
those that are considered difficult-to-treat and multidrug-resistant. Cumberland acquired Vibativ to further add to its
product offerings, increase its net revenue and positively contribute to the Company's operating results. Cumberland
expects to deduct the goodwill acquired in the acquisition for tax purposes.

Cumberland has accounted for the transaction as a business combination in accordance with ASC 805 and the
product sales are included in the results of operations subsequent to the acquisition date. The Company paid an
upfront payment of $20.0 million at closing and a $5.0 million cash payment during early 2019. In addition,
Cumberland agreed to pay a royalty of up to 20% on future net sales of the product. The future royalty payments
were required to be recognized at their acquisition-date fair value as part of the contingent consideration transferred
in the business combination.

The following table summarizes the initial payments and consideration for the business combination:

Consideration:

Cash paid at closing

Cash payment during early 2019

Fair value of contingent consideration - net sales royalty

Total consideration

20,000,000

5,000,000

9,182,000

34,182,000

The contingent consideration liability represents the future net sales royalty payments discussed above.
Cumberland prepared the valuations of the contingent consideration liability and the intangible assets utilizing
significant unobservable inputs. As a result, the valuations are classified as Level 3 fair value measurements.

F-20

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The following table presents the changes in the Company's Level 3 contingent consideration liability that is
remeasured at fair value on a recurring basis. The contingent consideration earned and accrued in operating
expenses is paid to the seller quarterly.

Balance at November 12, 2018

Change in fair value of contingent consideration included in operating expenses

Contingent consideration earned and accrued in operating expenses

Balance at December 31, 2018

Adjustment to initial fair value of the contingent consideration liability

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 December 31, 2019

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 December 31, 2020

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 December 31, 2021

Contingent
consideration liability
9,034,000
$

(40,000)

508,000

9,502,000

148,000

(1,033,108)

(804,167)

820,864

8,633,589

(819,180)

(1,160,202)

1,546,346

8,200,553

(2,166,682)

(1,147,750)

1,629,506

6,515,627

The following table summarizes the allocation of the fair values of the assets acquired as of the acquisition date

for Vibativ:

Finished goods inventory

Work in process - unlabeled vials

Work in process - validation vials
Raw materials

Total inventory

Intellectual property amortizable intangible assets

Goodwill

Total intangibles and goodwill

Total assets acquired

6,624,000

3,970,000

1,827,000

9,129,000

21,550,000

11,750,000

882,000

12,632,000

34,182,000

The Company's contingent consideration liability is a Level 3 fair value measurement that is updated on a
recurring basis at each reporting period using a valuation model. Consistent with Level 3 fair value
measurements, there are significant inputs to the valuation model that are unobservable. The current portion of
the contingent consideration liability is $2.7 million and the non-current portion is $3.8 million, as of
December 31, 2021.

F-21

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(4)

Revenues

Product Revenues

The Company’s net product revenues consisted of the following for the years ended December 31:

Products:

Kristalose

Vibativ

Caldolor

Acetadote

Omeclamox-Pak
Vaprisol
RediTrex

2021

2020

2019

15,993,658 $

15,567,562 $

12,895,120

11,704,062

4,970,301

850,993

(388,657)

1,859,581

55,321

10,870,990

5,336,943

1,874,206

257,088

1,077,227

856,657

8,691,550

5,222,282

3,824,449

837,829

936,615

—

Total net product revenues

35,045,259 $

35,840,673 $

32,407,845

Other Revenues

During 2019, Cumberland executed a License and Distribution agreement with HongKong WinHealth Pharma
Group Co. Limited (“WinHealth”) for our Caldolor and Acetadote brands in China and Hong Kong. In conjunction
with these new arrangements, the Company terminated a previous License and Distribution agreement with Gloria
Pharmaceuticals Co ("Gloria Pharmaceuticals") for the two brands. In addition, we also signed a new License and
Distribution agreement with DB Pharm Korea Co., Ltd. (“DB Pharm”) for Vibativ in South Korea. As a result of
these agreements, Cumberland recognized approximately $0.3 million of non-refundable up-front payments as other
revenue in the consolidated statement of operations during 2019. There were no payments received in 2020 or 2021.

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 are
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.

The international agreements provide for $1.0 million in non-refundable up-front payments, milestone payments
of up to $2.2 million related to regulatory approvals and up to $4.8 million in payments related to product sales.
From 2012 through December 31, 2021, the Company has recognized a cumulative $1.2 million in upfront payments
as other revenue and has recognized $0.1 million in revenue related to the milestone payments associated with these
international agreements.

F-22

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Other revenues during 2021, 2020 and 2019 also include funding from federal grant programs including those
secured by CET through the Small Business Administration as well as lease income generated by CET’s Life
Sciences Center. The Life Sciences Center is a research center that provides scientists with access to flexible lab
space and other resources to develop biomedical products. Grant revenue from these programs totaled approximately
$0.4 million, $0.6 million, and $1.3 million for the years ending December 31, 2021, 2020 and 2019, respectively.

(5)

Inventories

The Company's net inventories consisted of the following as of December 31:

2021

2020

Raw materials and work in process, net of reserve

12,374,983 $

16,223,162

Consigned inventory
Finished goods, net of reserve

Total inventories

less non-current inventories

Total inventories classified as current

164,378

4,939,088

17,478,449

128,005

5,943,732

22,294,899

(9,048,567)

(11,656,742)

8,429,882 $

10,638,157

The Company works closely with third parties to manufacture and package finished goods for sale. Based on
the arrangements with the manufacturer or packager, the Company will either take title to the finished goods at the
time of shipment or at the time of arrival at the Company’s warehouses. The Company then holds such goods in
inventory until distribution and sale. These finished goods inventories are stated at the lower of cost or net realizable
value with cost determined using the first-in, first-out method.

The Company continually evaluates inventory for potential losses due to excess, obsolete or slow-moving goods
by comparing sales history and projections to the inventory on hand. 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
December 31, 2021 and 2020 the Company had recognized and maintained cumulative net realizable value charges
for potential obsolescence and discontinuance losses of approximately $1.4 million and $0.2 million, respectively.

In connection with the acquisition of certain product rights related to the Kristalose brand, the Company is
responsible for the purchase of the active pharmaceutical ingredient ("API") for Kristalose and maintains the
inventory at the third-party packagers. As the API is consumed in production, the value of the API is transferred
from raw materials to finished goods. API for the Company's Vaprisol brand is also included in the raw materials
inventory total at December 31, 2021 and 2020. Consigned inventory represents Authorized Generic inventory
stored with Perrigo until shipment.

As part of the Vibativ acquisition, Cumberland acquired API and work in process inventories of $15.6 million
that were classified as non-current inventories. At December 31, 2021, the Vibativ non-current API inventory was
$8.1 million and $11.2 million at December 31, 2020. The Company had Vibativ finished goods included in the
non-current inventories at December 31, 2021 of $0.5 million and $2.1 million Vibativ finished goods included at
December 31, 2020. At December 31, 2021 and December 31, 2020, Cumberland had $0.4 million in non-current
inventory for API related to its ifetroban clinical initiatives.

F-23

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(6)

Property and Equipment

Property and equipment consisted of the following at December 31:

Computer equipment

Office equipment

Furniture and fixtures

Leasehold improvements
Total property and
equipment, gross

Less: accumulated depreciation
and amortization

Total property and
equipment, net

Range of
useful lives

3 – 5 years

3 – 15 years

5 – 15 years
3 – 15 years, or

2021

2020

1,352,734 $

1,275,703

820,712

638,903

806,906

638,903

remaining lease term

1,422,439

1,409,744

4,234,788

4,131,256

(3,792,153)

(3,557,087)

442,635 $

574,169

Depreciation expense, including amortization expense related to leasehold improvements, is included in general
and administrative expense in the consolidated statements of operations. Depreciation expense was as follows for
the years ended December 31:

Depreciation expense

235,066 $

314,444 $

269,619

2021

2020

2019

F-24

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(7)

Intangible Assets and Goodwill

Intangible assets and Goodwill consisted of the following at December 31, 2021 and 2020.

Product and license rights

Less: accumulated amortization

Total product and license rights

Patents

Less: accumulated amortization

Total patents

Trademarks
Less: accumulated amortization

Total trademarks

Total intangible assets

Goodwill

2021

2020

38,543,542 $

38,543,542

(18,015,112)

(14,709,824)

20,528,430

10,478,930

23,833,718

10,306,922

(7,333,251)

(6,312,460)

3,145,679

3,994,462

373,462

(93,096)

280,366

338,011

(47,875)

290,136

23,954,475 $

28,118,316

882,000 $

882,000

Product and license rights include assets associated with the Company's acquired products, including those
discussed in Note 3, RediTrex and Vibativ. In November 2016, the Company acquired the U.S. rights to Nordic
Group B.V.’s injectable methotrexate product line as an asset purchase. The agreement requires the Company to
provide unvested restricted shares of Cumberland common stock and make a series of payments tied to the products’
FDA approval, launch and achievement of certain sales milestones. The payments are being treated as consideration
for the assets acquired and are being capitalized and amortized over the expected useful life of the acquired asset. To
date, the intangible assets related to the product include the $100,000 deposit paid at closing, the 180,000 restricted
shares valued at $0.9 million that vested upon the November 2019 FDA approval, the additional $1.0 million paid to
Nordic during 2020 based on the 2019 FDA approval and the $1.0 million owed to Nordic based on the 2020
product launch.

As discussed in Note 3, during November 2018, the Company acquired Vibativ from Theravance. This resulted
in amortizable intangible assets related to the product rights of $11.8 million and goodwill of $0.9 million. The
intangible assets are being amortized through November 2028, the expected useful life of the acquired asset.

During 2021 and 2020, the Company recorded an additional $0.2 million and $0.5 million, respectively, in
intangible assets for patents, trademarks and capitalized patent costs, including amounts incurred in the protection of
the Company's intellectual property. These costs will be amortized over the remaining expected useful life of the
associated patents.

Amortization expense related to product and license rights, trademarks and patents were as follows for the years

ended December 31

Amortization expense

4,371,300 $

4,434,120 $

4,134,557

2021

2020

2019

F-25

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The expected amortization expense for the Company's current balance of intangible assets are as follows:

Year ending December 31:

2022
2023
2024
2025
2026 and thereafter

3,736,647
3,674,355
3,652,566
3,637,002
9,253,905
23,954,475

(8)

Other Current and Other Long-term Liabilities

Other current liabilities consisted of the following at December 31:

Other current liabilities

2021

2020

Rebates, product returns, administrative fees
and service fees
Employee wages and benefits

Current portion of accrued contingent consideration

Accrued inventory purchases

Paycheck Protection Program liability

Other

3,680,677 $

4,072,151

1,340,846

2,685,531

18,211

—

943,038

998,064

2,787,741

294,000

2,187,140

915,285

Total other current liabilities

8,668,303 $

11,254,381

Other long-term liabilities

2021

2020

Non-current portion of accrued contingent consideration

3,830,096 $

4,855,363

Deferred compensation

Other

3,433,962

224,786

2,702,772

304,637

Total other long-term liabilities

7,488,844 $

7,862,772

F-26

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(9)

Debt

On December 31, 2021, the Company entered into a Fifth Amendment to the Revolving Credit Note and Sixth
Amendment (the "Sixth Amendment") to Revolving Credit Loan Agreement with Pinnacle Bank (the "Pinnacle
Agreement"). The Sixth Amendment increased the principal amount by $5 million to $20 million. On October 28,
2021, the Company entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment to
Revolving Credit Loan Agreement with Pinnacle Bank. Among other terms, the Fourth Amendment extended the
maturity date to October 1, 2024. The Pinnacle Agreement includes specific financial covenants including Debt
Ratio and Tangible Capital Ratio.

The Company had $15 million in borrowings under the Pinnacle Agreement at December 31, 2021 and 2020.

The interest rate on the Pinnacle Agreement is based on LIBOR plus an interest rate spread. The pricing under
the Fourth Amendment provides for an interest rate spread of 1.75% to 2.75% above LIBOR with a minimum
LIBOR of 0.90% (representing an interest rate of 3.65% at December 31, 2021). In addition, a fee of 0.25% per
year is charged on the unused line of credit. Interest and the unused line fee are payable quarterly. In 2022, the
LIBOR benchmark rate is expected to be discontinued. When the LIBOR rate is no longer available, the Pinnacle
Agreement calls for a new Benchmark rate to be used to determine the interest rate for the Agreement.

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

Paycheck Protection Program Loan

The PPP is administered by the U.S. Small Business Administration ("SBA"). The loan was scheduled to
mature April 14, 2022, and bears interest at a rate of 1.0% per year, payable monthly. The loan could be prepaid at
any time prior to maturity with no prepayment penalties. Funds from the loan are to be used to maintain payroll,
continue group health care benefits and pay for rent and utilities.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying
expenses as described in the CARES Act, including qualifying payroll costs, covered rent payments, and covered
utilities. From the date of funding the Company has used the loan amount for such qualifying expenses.
Cumberland has elected to account for the proceeds of the loan as a government grant under International
Accounting Standard 20 ("IAS 20"), Accounting for Government Grants and Disclosure of Government Assistance.
The permitted analogous use of IAS 20 outlines a model for the accounting for government assistance, including
forgivable loans. As a result, the Company has recorded the $2,187,140 as a deferred income liability, which is
included as a component of other current liabilities on the consolidated balance sheet as of December 31, 2020.

Cumberland applied for this loan after carefully considering, with its bank, the eligibility criteria to participate
in this program, and determining that Cumberland met these criteria. The Company evaluated and provided
information on our payroll and other qualifying expenses to determine the amount of PPP funds to apply for.

Cumberland has not laid off or furloughed any employees as a result of the COVID-19 pandemic and, based on
assistance from the PPP loan, the Company currently does not foresee doing so. In October 2020, the Company
submitted a request for forgiveness of the PPP loan. The request was approved by the lender, Pinnacle Bank, who
then submitted it to SBA for the SBA's review and approval.

On June 11, 2021, the Company received a notice from the SBA that the full amount of the loan was forgiven.
The Company accounted for the forgiveness of the loan under IAS 20 and recorded the $2,187,140 as other income
during the year ended December 31, 2021.

F-27

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(10)

Shareholders’ Equity

(a)

Initial Public Offering

On August 10, 2009, the Company completed its initial public offering of 5,000,000 shares of common stock at
a price of $17.00 per share, raising gross proceeds of $85.0 million. After deducting underwriting discounts of
approximately $6.0 million and offering costs incurred of approximately $4.2 million, the net proceeds to the
Company were approximately $74.8 million.

(b)

Preferred Stock

The Company is authorized to issue 20,000,000 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, 2021 and 2020, there was no
preferred stock outstanding.

(c)

Common Stock

During 2021, 2020 and 2019, the Company issued 192,684 shares, 228,500 shares and 225,536 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 2021, 2020 and 2019.

In November 2017, the Company filed its Shelf Registration on Form S-3 with the SEC associated with the sale
of up to $100 million in corporate securities. The Shelf Registration was declared effective in January 2018. It also
included an At the Market ("ATM") feature that allows the Company to sell common shares at market prices, along
with an agreement with B. Riley FBR Inc. 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 this ATM during the years ended December 31, 2021 or 2020.

(d)

Share Repurchases

The Company currently has a share repurchase program to repurchase up to $10 million of its common stock
pursuant to Rule 10b-18 of the Securities Exchange Act, as amended. In January 2019, the Company's Board of
Directors established the current $10 million repurchase program to replace the prior authorizations. The Company
repurchased 438,359 shares, 503,626 shares and 623,478 shares of common stock for approximately $1.4 million,
$1.8 million, and $3.5 million during the years ended December 31, 2021, 2020 and 2019, respectively. There
remains $4.8 million available under the current repurchase program available for share repurchases at
December 31, 2021.

F-28

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(e)

Cumberland Emerging Technologies

In April 2019, Cumberland Emerging Technologies ("CET"), our majority-owned subsidiary, entered into an
agreement whereby Hongkong WinHealth Pharma Group Ltd. ("WinHealth") made a $1 million investment in CET
through the purchase of shares of its common stock. As part of the agreement, WinHealth obtained the rights to
name an individual for appointment to the CET Board of Directors as well as the first opportunity to license CET
products for the Chinese market. In connection with WinHealth's investment in CET, during 2019, Cumberland also
made an additional $1 million investment in CET. Cumberland purchased additional CET shares through
contribution of $0.3 million in cash and a conversion of $0.7 million in intercompany loans payable. Upon
completion of the additional investment by WinHealth and Cumberland, Gloria Pharmaceuticals returned its shares
in CET in exchange for consideration of $0.8 million that was funded during 2020. After the additional investment,
the Company’s ownership in CET is 85%. As CET is a consolidated subsidiary, the Company reports the operating
results of CET and allocates the noncontrolling interests to the non-majority partners.

(f)

Cumberland Foundation

In December 2017, the Company formed the Cumberland Pharma Foundation (the "Foundation") to serve as a

vehicle to facilitate the ongoing philanthropic endeavors of Cumberland Pharmaceuticals Inc.

The Foundation was formed as a nonprofit corporation designed to qualify as a tax-exempt organization
pursuant to Section 501(a) of the Internal Revenue Code. The Foundation’s Board of Directors is comprised of
Cumberland Pharmaceuticals executives who are responsible for overseeing the Foundation’s ongoing activities
including charitable contributions.

In 2018, Cumberland provided a grant of 50,000 shares of the Company's common stock to the Foundation. The
shares will address the ongoing financial needs of the Foundation. The organization also plans to hold a portion of
the shares for long-term appreciation. The Foundation maintains separate financial statements and its ongoing
operations will not impact the financial statements of Cumberland Pharmaceuticals. Initial annual grants by the
Foundation have been and are expected to remain consistent with the historic level of contributions made by
Cumberland Pharmaceuticals. During 2019, Cumberland Pharmaceuticals committed approximately $50,000 in
cash contributions that were paid to the Foundation during 2020. Likewise, during 2020, the Company committed
approximately $25,000 in cash contributions paid to the Foundation during 2021.

(g)

Nordic Group B.V.

On November 27, 2019, Cumberland received approval from the FDA for the pre-filled syringe of the
Methotrexate product. With this approval, Nordic's 180,000 shares of Cumberland's common stock became vested.
The value of these shares at the date of approval was $0.9 million.

F-29

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(11)

Earnings (Loss) Per Share

The following table shows the computation of the numerator and the denominator used to calculate diluted

earnings (loss) per share for the years ended December 31:

2021

2020

2019

Numerator:

Net income (loss) from continuing
operations
Discontinued operations

Net income (loss)

Net loss at subsidiary attributable to
noncontrolling interests

Net income (loss) attributable to
common shareholders

Denominator:

Weighted-average shares outstanding
– basic
Dilutive effect of restricted stock and
stock options
Weighted-average shares outstanding
– diluted

(5,597,121) $

(6,625,779) $

(9,211,688)

1,994,322

3,206,875

5,665,177

(3,602,799)

(3,418,904)

(3,546,511)

95,212

79,496

8,752

(3,507,587) $

(3,339,408) $

(3,537,759)

14,904,834

15,162,184

15,396,098

—

14,904,834

15,162,184

15,396,098

The Company's anti-dilutive restricted shares and stock options outstanding were as follows for the years

ended December 31:

Anti-dilutive shares and options

183,300

197,610

4,000

2021

2020

2019

F-30

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(12)

Income Taxes

The components of the Company's net deferred tax assets at December 31 are as follows:

Deferred Tax Assets

Net operating loss and tax credits

Property and equipment and intangibles

Allowance for accounts receivable

Reserve for expired product

Inventory

Deferred charges
Cumulative compensation costs incurred on deductible equity
awards

Total deferred tax assets

Deferred Tax Liabilities

Intangible assets

Net deferred tax assets, before valuation allowance

Less: deferred tax asset valuation allowance

Net deferred tax assets

2021

2020

16,817,070 $

16,961,650

222,893

83,931

457,723

104,824

1,303,664

227,056

249,483

438,235

100,362

952,711

834,070

928,638

19,824,175

19,858,135

(62,253)

(662,014)

19,761,922

19,196,121

(19,761,922)

(19,196,121)

— $

—

The following table summarizes the amount and year of expiration of the Company's federal and state net

operating loss carryforwards as of December 31, 2021:

Years of expiration

Federal

State

2022

2023 - 2029

2030

2031 - 2039

Indefinite Period
Total federal and state net operating loss carryforwards

— $

—

44,153,819

7,534,351

4,345,272

—

49,253,796

355,874

9,822,440

279,025

56,033,442 $

59,711,135

F-31

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Income tax (expense) benefit includes the following components for the years ended December 31:

2021

2020

2019

Current:

Federal

State and other

Total current income tax (expense)
benefit

34,891

— $

21,802 $

(55,902)

65,408

79,316

(34,100)

144,724

Deferred:

Federal

State

Total deferred income tax
(expense) benefit
Total income tax (expense) benefit $

61,678

(61,678)

(21,802)

—

(21,802)

34,891 $

(55,902) $

(65,408)

—

(65,408)

79,316

The Company’s effective income tax rate for 2021, 2020 and 2019 reconciles with the federal statutory tax rate

as follows:

Federal tax expense at statutory rate

State income tax expense (net of federal
income tax benefit)
Permanent differences associated with
general business credits
Change in valuation allowance

Other permanent differences

Other

Net income tax expense

2021

2020

2019

21 %

1 %

— %

(19) %

(4) %

— %

(1) %

21 %

4 %

6 %

(23) %

(7) %

(3) %

(2) %

21 %

4 %

7 %

(31) %

1 %

— %

2 %

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,
2021 and December 31, 2020.

F-32

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of December 31, 2021, the Company has general business credit carryforwards of $1.7 million. These

credit carryforwards will expire in years 2022 through 2041.

Years of expiration

2022

2023-2029

2030-2039

2040-2041

Federal

161,119

461,157

648,120

410,709

Total federal and state credit carryforwards

1,681,105

The Company expects it will continue to pay minimal taxes in future periods through the continued utilization

of net operating loss carryforwards, as it is able to achieve taxable income through its operations.

The Company is no longer subject to U.S. federal tax examinations for tax years before 2018, and with few
exceptions, the Company is not subject to examination by state tax authorities for tax years which ended before
2018. Loss carryforwards and credit carryforwards generated or utilized in years earlier than 2018 remain subject to
examination and adjustment. During 2012, the 2009 federal tax return was examined by the Internal Revenue
Service with no significant findings or adjustments. The Company has no unrecognized tax benefits at December
31, 2021 and 2020.

(13)

Stock-Based Compensation Plans

The Company has grants outstanding under three equity compensation plans, with two of the plans available for
future grants of equity compensation awards to employees, consultants and directors. All of the equity plans were
approved by shareholders. The 2007 Long-Term Incentive Compensation Plan (the "2007 Plan") and the 2007
Directors’ Incentive Plan (the "Directors’ Plan") superseded the 1999 Stock Option Plan. 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 2.4 million shares of common stock for issuance under the 2007 Plan and 250,000 shares for
issuance under the Directors’ Plan.

The exercise price of stock options is generally 100% of the fair market value of the underlying common stock
on the grant date. The maximum contractual term of stock options is ten years from the date of grant, except for
incentive stock options granted to 10% shareholders, which is five years.

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 date of grant.
Restricted stock issued to directors vests on the one year anniversary of the date of grant.

F-33

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Stock compensation expense is presented as a component of general and administrative expense in the
consolidated statements of operations. Stock compensation expense consisted of the following for the years ended
December 31:

2021

2020

2019

Share-based compensation - employees

Share-based compensation -
nonemployees

Total share-based compensation

730,412 $

1,050,179 $

1,481,016

11,455

(3,663)

4,882

741,867 $

1,046,516 $

1,485,898

At December 31, 2021, there was approximately $1.1 million of unrecognized compensation cost related to
share-based payments, which is expected to be recognized over a weighted-average period of 2.05 years. This
amount relates primarily to unrecognized compensation cost for employee restricted stock and stock options awards.

Stock Options

The Company granted 186,900 incentive stock options during 2021, which vest in four years. There were no
options exercised during 2021, 2020 and 2019. As such, there was no intrinsic value of options or weighted-average
fair value of options exercised for the periods.

For the incentive stock options issued to date, the weighted average grant price was $3.17, and the weighted

average fair value of these stock option grants was $1.52.

The fair value of stock options is calculated using the Black-Scholes (“Black-Scholes-Merton”, or “BSM”)
option-pricing model on the date of grant. Since 2012, the Company had been issuing RSA’s (Restricted Share
Awards) where the grant date Fair Value (“FV”) equaled the closing share price. The ISO’s required a BSM
valuation to approximate FV. The following inputs were used in the creation of the valuation.

•

Volatility - We estimate volatility in accordance with SAB No. 107, as amended by SAB No. 110. We
have been publicly traded since August 2009, so we have sufficient years of trading history and volatility to
appropriately evaluate this component of the BSM model. As such, we are using our own historical
volatility to value stock options. We have noted no conditions that would indicate the historical volatility
would not be an indicator of future volatility, as such we are using historical volatility over the same period
as the expected term of the awards (7 years) back to 2017 and believe it to be sufficient. Calculated
volatility for the grants issued in 2021 ranges from 31% to 43%. Our average volatility over the life of
stock being public is 36% and 38% over the last 6 months. Based on the similar amounts, we believe our
volatility estimate for the ISO’s are appropriate.

Expected Term - We estimate the expected life of employee share options based on the simplified method
allowed by SAB No. 107, as amended by SAB No. 110. Under this approach, the expected term is
presumed to be the average between the weighted-average vesting period and the contractual term. The
ISO’s have a 10-year contractual term and the vesting period is 4 years. This results in a calculated
expected term of 7 years.

Risk Free rate - The risk-free interest rate is based on the U.S. Treasury Note, on the date of grant with a
term equal to the corresponding option’s expected term. So, in this case, we are using the 7 year treasury
note as of the date of grant, which ranges from 1.27% and 1.44% at the date of the grants.

Dividend yield - We have never declared or paid any cash dividends and there is currently no expected
cash dividend payments as of the date of this grant. As such, dividend yield is zero.

F-34

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Restricted Stock Awards

Restricted stock activity was as follows:

Nonvested, December 31, 2019

Shares granted
Shares vested
Shares forfeited

Nonvested, December 31, 2020

Shares granted
Shares vested
Shares forfeited

Nonvested, December 31, 2021

Number
of shares

Weighted-
average
grant-date
fair value

814,949 $
231,091
(228,500)
(38,125)
779,415
223,750
(192,684)
(70,750)
739,731 $

5.88
3.56
4.62
5.87
5.56
1.84
6.29
4.47
4.34

The fair value of restricted stock granted was based on the closing market price of the Company’s common
stock on the date of grant. 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.

(14)

Employee Benefit Plans

The Company sponsors an employee benefit plan that was established on January 1, 2006, the Cumberland
Pharmaceuticals 401(k) Plan (the "Plan"), under Section 401(k) of the Internal Revenue Code of 1986, as amended,
for the benefit of all employees over the age of 21, having been employed by the Company for at least six months.
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 2021, 2020 and 2019, the Company contributed approximately
$50,000 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 sheet, was $3.4 million and $2.7 million as of December 31, 2021 and
2020, 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 $3.2 million and $2.9 million as of December 31, 2021 and 2020, respectively.

(15)

Leases

The Company is obligated under long-term real estate leases for corporate office space that was extended during
the third quarter of 2015. Prior to this extension, the lease would have expired in October 2016, the lease is now set
to expire in October 2022.

On November 15, 2021, Cumberland entered into a lease, pursuant to which the Company will lease
approximately 16,631 rentable square feet of space at the new development Broadwest located in Nashville,
Tennessee with 1600 West End Avenue Partners, LLC. The Leased Premise will serve as the Company's new
corporate headquarters. The initial term of the Lease is one hundred fifty-seven (157) months, with two consecutive
options to renew for a period of five years each, and will commence on the earlier of November 1, 2022, the date

F-35

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

which Tenant takes occupancy of the Leased Premise, or the date which Tenant receives a temporary or permanent
certificate of occupancy for the Leased Premise.

The Company will be responsible for paying rent to the Landlord under the Lease beginning three months after
the Commencement Date. The Company will pay a base rent of $33.06 per square foot of rentable space with a
gradual rental rate increase of 2.5% for each year period thereafter of the prior year's base rental. 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.

In addition, the research lab space at CET, under an agreement amended in July 2012, is leased through April
2023, with an option to extend the lease through April 2028. The Company also subleases a portion of the space
under these leases.

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. Rent expense and sublease income as
follows for the years ended December 31:

Rent expense

1,209,102 $

1,166,411 $

1,246,143

2021

2020

2019

Sublease income*

699,889 $

680,627 $

688,020

*Minor amounts due in 2022.

In March 2016, the FASB issued ASU 2016-02. ASU 2016-02’s core principle is to increase transparency and
comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing
key information. The primary effect of adopting ASU 2016-02 to the Company was to record right-of-use assets and
obligations for the leases currently classified as operating leases.

The Company’s significant operating leases include the lease of approximately 25,500 square feet of office
space in Nashville, Tennessee for its corporate headquarters. This lease currently expires in October 2022. The
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
lease currently expires in April 2023.

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. Incremental borrowing rates reflect the Company’s estimated interest rates for
collateralized borrowings over similar lease terms. The weighted-average remaining lease term is 1 years and the
weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments is
7.42%.

Lease Position

At December 31, 2021 and 2020, the Company recorded the following on the Consolidated Balance Sheet:

Operating lease right-of-use assets

Right-of-Use Assets

December 31, 2021

December 31, 2020

1,024,200

2,028,148

F-36

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Lease Liabilities

December 31, 2021

December 31, 2020

Operating lease current liabilities

Operating lease non-current liabilities

Total

969,677

90,016

1,059,693

1,016,779

1,059,693

2,076,472

Excluding the Broadwest lease, cumulative future minimum sublease income under non-cancelable operating
subleases totals approximately $0.1 million and will be paid through the leases ending in October 2022 and April
2023. 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 Leases Liabilities at December 31, 2021

Operating Leases

2022
2023

Total lease payments

Less: Interest

Present value of lease liabilities

1,019,313

92,478

1,111,791

(52,098)

1,059,693

(16) Market Concentrations

The Company is focused on the acquisition, development and commercialization of branded prescription
products. The Company’s principal financial instruments subject to potential concentration of credit risk are
accounts receivable, which are unsecured, and cash equivalents. The Company’s cash equivalents consist primarily
of money market funds. Certain bank deposits may be in excess of the insurance limits provided by the Federal
Deposit Insurance Corporation.

The Company’s primary customers are wholesale pharmaceutical distributors in the U.S. Total revenues by
customer for each customer representing 10% or more of consolidated revenues are summarized below for the years
ended December 31:

Customer 1
Customer 2
Customer 3

2021

27%
24%
20%

2020

25%
25%
21%

2019

31%
28%
17%

The Company’s accounts receivable, net of allowances, due from the customers representing 10% or more of

consolidated revenue was 51% and 60% at December 31, 2021 and 2020, respectively.

(17) Manufacturing and Supply Agreements

The Company utilizes one or two 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

F-37

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

suppliers could cause a delay in manufacturing or shipment of finished goods and possible loss of sales, which could
adversely affect operating results.

(18)

Employment Agreements

The Company has entered into employment agreements with all its full-time employees. Each employment
agreement provides for a salary for services performed, a potential annual bonus and, if applicable, a grant of
restricted common shares pursuant to a restricted stock and incentive stock option agreement.

(19)

Discontinued Operations

In 2016, Cumberland entered into an agreement with Clinigen Group Plc ("Clinigen") for the rights and
responsibilities associated with the commercialization of Ethyol in the United States. In 2017, the Company entered
into another agreement with Clinigen for the rights and responsibilities associated with the commercialization of
Totect in the United States. Ethyol and Totect are collectively referred to herein as the "Products."

Early in 2019, Cumberland announced a strategic review of the Company's brands, capabilities, and
international partners. This review followed an accelerated business development initiative, which resulted in a
series of transactions. Because of that progress, Cumberland felt that it was prudent to take a fresh look at our
product portfolio, partners, and organization to ensure proper focus and capabilities. During May 2019, Cumberland
entered into the Dissolution Agreement with Clinigen in which the Company returned the exclusive rights to
commercialize Ethyol and Totect (“the Products”) in the United States to Clinigen. This Dissolution Agreement
originally targeted a transition from the Company's arrangements with Clinigen effective September 30, 2019, but
was then amended to change the transition date to December 31, 2019. Under the terms of the Dissolution
Agreement, Cumberland was no longer responsible for the distribution, marketing and promotion of either the
Products or any competing products after December 31, 2019. In exchange for the return of these product license
rights and the non-compete provisions of the Dissolution Agreement, Cumberland received $5 million in financial
consideration paid in quarterly installments over the two-years following the transition date. Cumberland recorded
the last four quarterly installments totaling $2.0 million during the year ended December 31, 2021 and the first four
quarterly installments totaling $3.0 million during the year ended December 31, 2020.

The exit from the Ethyol and Totect Products meets the accounting criteria to be reported as discontinued
operations. December 31, 2019, as the transition date, was the final day Cumberland was responsible for the
Products. Cumberland was responsible for the Products through December 31, 2019 and beginning on January 1,
2020, the Products' rights transitioned back to Clinigen. As a result, January 1, 2020, was the first day of
discontinued operations for the Ethyol and Totect products.

The Products provided revenue, incurred direct expenses and resulted in discontinued operations income during
the periods presented. The following amounts have been separated from continuing operations, as discontinued
operations, for all periods presented. The direct expenses separated for discontinued operations do not reflect the
direct selling and marketing costs attributable to the individuals at Cumberland responsible for promotion of the
Products. Subsequent to the transaction date, those sales and marketing individuals who supported the Products
shifted their efforts from the Products and continue to support other Cumberland brands.

Revenues

Costs of products sold
Selling, Marketing and other

2021

2020

2019

1,994,322 $

3,206,875 $

13,145,344

—
—

1,330,704
6,149,463

Income from discontinued operations

1,994,322 $

3,206,875 $

5,665,177

F-38

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(20)

Commitments and Contingencies

Commitments

In connection with its licensing agreements for Caldolor, the Company is required to pay royalties based on net
sales over the life of the product. Royalty expense is recognized as a component of selling and marketing expense in
the period that revenue is recognized.

In connection with its licensing agreements for Ethyol and Totect, the Company was required to pay royalties
based on net sales. The royalty expense was recognized as a component of selling and marketing expense in the
period the associated revenue was recognized through the end of the licensing period, December 31, 2019.

In connection with the acquisition of Vibativ, the Company is required to pay royalties based on net sales of the
product. At the purchase date, Cumberland recorded the fair value of this liability and will continue to evaluate the
liability each period and the royalty expense is recognized as a component of selling and marketing expense in the
period that the change in fair value is recognized.

In connection with the acquisition of Sancuso, the Company is required to pay an upfront payment of
$13.5 million to Kyowa Kirin upon closing, up to $3.5 million in milestones and tiered royalties ranging from 10%
to 5% on U.S. net product sales for ten years. The Company has reviewed the relevant guidance and sought
appropriate feedback from outside accounting and legal experts regarding the application of ASC 805. Based on this
review, the Company has concluded the Sancuso acquisition should be accounted for as a Business Combination.
The Company has hired an outside expert to prepare the valuation of the assets and liabilities acquired for Sancuso.
We expect to receive the valuation sometime in the second quarter of 2022.

Legal Matters

Cumberland has a number of Patents issued through the United States Patent and Trademark Office (the
“USPTO”) including U.S. Patent number 8,148,356 (the “356 Acetadote Patent”) which is assigned to the Company.
The claims of the 356 Acetadote Patent encompass the new Acetadote formulation and include composition of
matter claims. Following its issuance, the 356 Acetadote Patent was listed in the FDA Orange Book. The 356
Acetadote Patent is scheduled to expire in May 2026, which time period includes a 270-day patent term adjustment
granted by the USPTO.

Since 2012, Cumberland has continued to vigorously defend and protect its Acetadote product and related

intellectual property rights including the use of all its legal options.

Melinta Litigation

On February 2, 2022, the Company filed an action for breach of contract against Melinta Therapeutics, LLC and
Targanta Therapeutics Corporation (collectively, the “Defendants”) in the United States District Court for the
Southern District of New York (Case No. 1:22-cv-00915-VM). The Company and the Defendants are parties to an
agreement (the “Agreement”), pursuant to which the Defendants have a license to develop and commercialize
products under certain Company patents, in exchange for the Defendants paying the Company certain milestone
payments and royalties on net sales of the licensed products.

Specifically, the Agreement requires the Defendants to, among other things, make a $500,000 payment to the
Company within 30 days following the first filing of an sNDA in relation to the Product (as defined the Agreement)
and a $500,000 payment to the Company following the approval of the first sNDA in relation to the Product.

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 $1 million in milestone payments
to the Company. The Company is seeking damages in the amount of no less than $1 million, prejudgment interest
under N.Y. C.P.L.R. § 5001, costs, and such further relief as the court deems just and proper.

F-39

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company is a party to various other legal proceedings in the ordinary course of its business. In the opinion
of management, the liability associated with these matters, will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.

F-40

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(21)

Quarterly Financial Information (Unaudited)

The following table sets forth the unaudited operating results for each fiscal quarter of 2021 and 2020:

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total

2021:

Net revenues

Operating income (loss)

Net income (loss) from continuing
operations
Net income (loss) from discontinued
operations
Net income (loss) attributable to
common shareholders

Earnings (loss) per share attributable to
common shareholders (1)
Continuing operations - basic

Discontinued operations - basic

Basic

Continuing operations - diluted

Discontinued operations - diluted

Diluted

2020:

Net revenues

Operating income (loss)

Net income (loss) from continuing
operations
Net income (loss) from discontinued
operations
Net income (loss) attributable to
common shareholders

Earnings (loss) per share attributable to
common shareholders (1)
Continuing operations - basic

Discontinued operations - basic

Basic

Continuing operations - diluted

Discontinued operations - diluted

Diluted

$ 10,537,159 $ 9,055,483 $ 8,072,540 $ 8,319,861 $ 35,985,043

(324,300)

(1,435,729)

(1,563,395)

(4,353,996)

(7,677,420)

(350,749)

724,684

(1,583,480)

(4,387,576)

(5,597,121)

495,410

498,807

496,787

503,318

1,994,322

166,828

1,228,560

(1,055,278)

(3,847,697)

(3,507,587)

(0.02) $

0.05 $

(0.10) $

(0.29) $

0.03

0.37

0.13

0.01 $

0.08 $

(0.07) $

(0.26) $

(0.24)

(0.02) $

0.05 $

(0.10) $

(0.29) $

0.03

0.37

0.13

0.01 $

0.08 $

(0.07) $

(0.26) $

(0.24)

$ 8,330,734 $ 9,598,177 $ 9,250,689 $ 10,261,534 $ 37,441,134

(1,846,001)

(1,580,962)

(1,208,686)

(1,745,946)

(6,381,595)

(1,883,418)

(1,679,211)

(1,275,620)

(1,787,530)

(6,625,779)

818,273

738,622

777,916

872,064

3,206,875

(1,055,620)

(918,275)

(481,737)

(883,776)

(3,339,408)

(0.12) $

(0.11) $

(0.08) $

(0.12) $

0.05

0.06

(0.07) $

(0.06) $

(0.03) $

(0.06) $

(0.12) $

(0.11) $

(0.08) $

(0.12) $

0.05

0.06

(0.07) $

(0.06) $

(0.03) $

(0.06) $

(0.43)

0.21

(0.22)

(0.43)

0.21

(0.22)

(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-41

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

Years ended December 31, 2021, 2020 and 2019

Schedule II

Description

Balance at
beginning of
period

Charged to
costs and
expenses

Charged to
other
accounts

Deductions

Balance at
end of period

Allowance for uncollectible
amounts, cash discounts,
chargebacks, and credits
issued for damaged products:

For the years ended
December 31:

2019

2020

2021

804,420 $ 5,915,066

792,051

4,940,313

984,677

2,963,279

—

$ (5,927,435) (1) $

792,051

(4,747,687) (1)

(3,606,992) (1)

984,677

340,964

Valuation allowance for
deferred tax assets:

For the years ended
December 31:

2019

2020

2021

$ 17,382,052 $ 1,129,109

18,511,161

19,196,121

684,960

565,801

—

$ 18,511,161

19,196,121

19,761,922

(1) Composed of actual returns and credits for chargebacks and cash discounts.

F-42

Corporate Information

Forward Looking Statement
This annual report includes
forward-looking statements
regarding expected future results
of the company. A variety of
factors could cause actual results
to differ materially from expected
results. Please see the risk
factors more fully described in
our Annual Report on Form 10-K
for the year ended December 31,
2021, which is filed with the
U.S. Securities and Exchange
Commission.

Company Headquarters
Cumberland Pharmaceuticals Inc.
2525 West End Avenue, Suite 950
Nashville, Tennessee 37203
Phone: (615) 255-0068
Toll Free: (877) 484-2700
Fax: (615) 255-0094

Stock Listing
NASDAQ Global Select
Market Ticker Symbol: CPIX

Annual Meeting
9:30 a.m. Central Time
Thursday, April 28, 2022
Cumberland Headquarters
2525 West End, Suite 950
Nashville, Tennessee 37203

Independent Registered Public
Accounting Firm
BKD, LLP
Two American Center
3102 West End Avenue
Suite 1050
Nashville, TN 37203
(615) 988-3600

Transfer Agent and Registrar
Continental Stock Transfer
& Trust Company
1 State Street, 30th Floor
New York, New York 10004
(800) 509-5586
(212) 509-4000
cstmail@continentalstock.com

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Board of Directors

A.J. Kazimi
Chairman and Chief Executive Officer
Cumberland Pharmaceuticals

James R. Jones
Former Managing Partner
KPMG LLP-Nashville

Dr. Gordon R. Bernard
Executive Vice President
for Research
Vanderbilt University
Medical Center

Martin E. Cearnal
President, Pharma Sales Corp
and Chief Commercial Officer
Cumberland Pharmaceuticals

Joey A. Jacobs
Former Chairman and
Chief Executive Officer
Acadia Healthcare Co. Inc

Former Chairman and
Chief Executive Officer
Psychiatric Solutions, Inc.

Kenneth J. Krogulski
President and Chief
Investment Officer
Berkshire Asset Management

Caroline R. Young
Vice President of
Partnership Development
First Cressey Ventures

Former President
Nashville Health Care Council

Joseph C. Galante
Former Chairman
Sony Music Nashville

Former President
RCA Records

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