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”). In addition to these commercial brands, we have Phase II clinical programs underway evaluating our ifetroban product candidate for patients with 1) 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 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 building 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. We believe we can leverage this existing infrastructure to support new products and 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 brands.

2022 Highlights

Below is a list of our company’s highlights from 2022. For more information, please see Part I, Item I, Business, of this Form 10-K.

•Acquired the U.S. rights to the FDA-approved oncology-supportive care medicine Sancuso® from Kyowa Kirin, Inc., the U.S. affiliate of Japan-based Kyowa Kirin Co., Ltd.

•Formed a specialty sales division, Cumberland Oncology, to support Sancuso. To augment those efforts, we also entered into a co-promotion agreement to feature Sancuso through another national oncology sales organization.

•Launched Vibativ® in Puerto Rico, through a partnership with Verity Pharmaceuticals, who has a particular strength and experience in that market.

•Announced a new partnership with Saudi Arabia-based Tabuk Pharmaceutical Manufacturing Co., a fully owned subsidiary of the Astra Industrial Group, to introduce Vibativ in the Middle East.

•Signed a new agreement with Laboratorios Pisa, S.A. de C.V. for the exclusive supply and distribution of Caldolor®, Cumberland’s ibuprofen injection product, in Mexico.

•Entered into two amendments to our agreement with Nordic Group B.V. who had provided us with a license for the U.S. rights associated with our RediTrex® line. Pursuant to the amendment, in exchange for financial consideration, Nordic may assume responsibility for distributing the methotrexate products in the U.S. after June 30, 2023.

•Announced the relocation of our headquarters into new offices located on the Broadwest campus in the Vanderbilt/West End corridor of Nashville, which will allow us to accommodate our expected growth and better serve our international base of customers and partners.

•Named Martin S. Brown Jr. to our Board of Directors. Mr. Brown is an attorney with over 30 years of corporate law experience who brings significant legal, public company, health care and civic experience to our board. The Company relies on several law firms for legal advice, including the firm in which Martin is affiliated.

•Released our third annual Sustainability Report, which details the company’s activities pertaining to our environmental, social and governance matters.

•Modified our line of credit with Pinnacle Bank, which provides for a remaining three-year facility for up to $20 million which ends in October 2024.

•Continued our corporate share repurchase initiative, with a group of our board members also purchasing shares through Rule 10b5-1 trading plans in order to add to their holdings in the company.

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 revenue was approximately 3.2% percent of net revenues in 2022 and 2.6% in 2021.

Our financial statements reflect accounts receivable allowances of $0.6 million and $0.3 million at December 31, 2022 and 2021, respectively, for chargebacks and early pay discounts for products.

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

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 product returns and rebates represents the majority of the balance. Sales related accrued liabilities for rebates, product returns, service fees, and administrative fees totaled $8.3 million and $3.7 million as of December 31, 2022 and 2021 , respectively. Of these amounts, our estimated liability for fee for services represented $1.5 million and $1.0 million, respectively, while our accrual for product returns totaled $2.7 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 $0.6 million and $0.4 million for the year ended December 31, 2022 and 2021, respectively. 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, 2022 and 2021.

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, 2022, 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, 2022 compared to year ended December 31, 2021

The following table presents the statements of operations for the years ended December 31, 2022 and 2021:

Years ended December 31,

Costs and expenses:

The following table summarizes net revenues for the years presented:

Years ended December 31,

Products:

Net revenues. Net revenues for the year ended December 31, 2022, were approximately $42.0 million compared to $36.0 million for the year ended December 31, 2021, representing an increase of $6.0 million or 16.7%. Net revenue increased during the 2022 period as a result of our newest product Sancuso which contributed net revenue of $13.2 million. This increase was offset by decreased net sales of Vibativ and Vaprisol.

Kristalose revenue declined by $0.8 million, or (4.9)%, compared to December 31, 2021, primarily as a result of timing of sales of our shipments to one of our co-promotion partners.

Vibativ revenue was $7.5 million compared to $11.7 million in the prior year. This $4.2 million decline in net revenue was a result higher sales volume for the product in 2021 associated in part with wholesale stocking of our new packaged product.

Caldolor revenue experienced a 2.9% decrease to $4.8 million during the year ended December 31, 2022, compared to $5.0 million in the same period last year. This decrease in Caldolor revenue for the year ended December 31, 2022, was the result of the timing of international shipments.

Vaprisol revenue decreased $2.3 million during the year ended December 31, 2022, compared to the prior year period due primarily to a temporary out of stock situation associated with a change in manufacturers.

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, 2022, the Acetadote net revenue decreased $0.3 million compared to the prior year due to an increase in expired product returns in 2022.

Omeclamox-Pak revenue increased $0.4 million during the year ended December 31, 2022, compared to the prior year. The increase was due to favorable sales adjustments and ownership changes at our packager which resulted in a temporary out of stock situation.

Reditrex revenue decreased $0.2 million in 2022 compared to 2021. Our 2022 gross wholesale revenue increased by $0.4 million, but the revenue growth was offset by expired product returns.

Cost of products sold. Cost of products sold for the year ended December 31, 2022, were $9.1 million compared to $8.8 million in the prior year. As a percentage of net revenues, cost of products sold were 21.7% compared to 24.5% 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 addition of our Sancuso sales.

Selling and marketing. Selling and marketing expense for the year ended December 31, 2022, were $16.7 million compared to $15.0 million in the prior year, which was an increase of $1.6 million. This increase was primarily a result of an increase in marketing expenses associated with the Sancuso acquisition including royalty costs, promotional spending and the cost associated with our new Oncology division.

Research and development. Research and development costs for the year ended December 31, 2022, were $6.7 million, compared to $5.7 million last year, representing an increase of $1.0 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 2022, we also experienced an increase in our annual FDA user fees.

General and administrative. General and administrative expenses for the year ended December 31, 2022, were $10.2 million compared to $9.8 million in the prior year. The change resulted from an increase in insurance expenses.

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

Financial Impact of Vibativ Years ended December 31,

(1) 2022 net revenue includes a $150,000 payment to Cumberland required under the terms of a new licensee agreement.

(2) 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.

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

Financial Impact of Sancuso Years ended December 31,

Royalty and operating expenses 4,202,026 —

Sancuso contribution $ 7,809,977 $ —

(1) 2022 net revenue includes a $250,000 payment to Cumberland required under the terms of a new licensee agreement and a $100,000 payment to Cumberland required under a sales representation agreement.

(2) The Sancuso 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 2022.

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 2022 totaled approximately $5.1 million which is an increase of $0.7 million due to the addition of Sancuso.

Income taxes. Income taxes totaled $68,850 for the year ended December 31, 2022, and $34,891 for the year ended December 31, 2021.

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, 2022 and December 31, 2021, 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:

Current ratio (multiple of current assets to current liabilities) 1.6 2.4

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

Cash provided by (used in):

Net (decrease) increase in cash and cash equivalents $ (7,282,846) $ 2,287,020

The net $7.3 million decrease in cash and cash equivalents for the year ended December 31, 2022, was attributable to cash provided by operating activities offset by cash used in investing and financing activities. Cash provided by operating activities of $8.5 million includes a decrease of inventory of $0.9 million, most of which was Vibativ and Sancuso related, an increase in accounts payable and other accrued liabilities of $14.5 million, partially offset by a $6.1 million increase in accounts receivable and a decrease in non-cash contingent consideration of $2.1 million. Cash used in investing activities of $13.7 million was the result of the acquisition of Sancuso of $13.5 million, additions to intangibles of $2.0 million, additions to property and equipment of $0.1 million and the proceeds of officer life insurance proceeds of $0.9 million. Our financing activities included payments of $2.2 million of contingent consideration for Vibativ and Sancuso and $1.1 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 $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 in 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 in 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.

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.

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. The Company did not issue any shares under this ATM during the year ended December 31, 2022.

Debt Agreement

On September 29, 2022, the Company entered into the Ninth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank (as amended, the "Pinnacle Agreement") to update the Funded Debt Ratio to mean the ratio of (i) Funded Debt less the amount of Unrestricted Cash in excess of $8,500,000, to (ii) EBITDA, as determined at the end of each fiscal quarter on a rolling four (4) quarter basis. For the year ended December 31, 2022, we were in compliance with the Funded Debt Ratio financial covenant.

On June 30, 2022, the Company entered into the Eighth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank permitting the Maximum Funded Debt Ratio to be calculated on a rolling four-quarter basis to be no more than 3.00 to 1.00 for the second and third quarters of 2022 and 2.50 to 1.00 for each quarter thereafter.

On March 31, 2022, the Company and Pinnacle Bank entered into a Seventh Amendment to the Revolving Credit Loan Agreement to revise and update the Maximum Funded Debt Ratio financial covenant and to delete from the Pinnacle Agreement the Funded Debt to Tangible Capital Ratio financial covenant. These changes were made to more appropriately reflect the impact from the Sancuso acquisition.

On December 31, 2021, the Company and Pinnacle Bank entered into the Fifth Amendment to the Revolving Credit Note and the Sixth Amendment to the Revolving Credit Loan Agreement in order to increase the principal amount of the Note from $15 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.

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.

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, 2022:

Payments Due by Year

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

2.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 $16.2 million line of credit assuming the current $16.2 million balance outstanding on December 31, 2022 is consistently outstanding through maturity of October 2024. Interest and unused line of credit payments are due and payable quarterly in arrears.

3.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.

4.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.

5.The Broadwest contractual cash obligation began upon commencement in October 2022.

OFF-BALANCE SHEET ARRANGEMENTS

During 2022 and 2021 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 adopted 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, 2022.

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 6.875% at December 31, 2022). 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 Rate will be determined in consultation with Pinnacle Bank. As of December 31, 2022, we had $16.2 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 2022, 2021 and 2020. 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, 2022. 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 2022, 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 2023 annual meeting of shareholders, which is expected to be filed with the SEC on or around March 13, 2023.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

a.Documents filed as part of this report:

1.Financial Statements

Page Number

Management’s Report on Internal Control over Financial Reporting F-1

Consolidated Balance Sheets F-5

Consolidated Statements of Operations F-6

Consolidated Statements of Cash Flows F-7

Consolidated Statements of Equity F-9

Notes to Consolidated Financial Statements F-10

(2) Financial Statement Schedule

Valuation and Qualifying Accounts F-42

b. Exhibits

ExhibitNumber Description

4.11 Description of Cumberland Pharmaceutical's Common Stock

23.1 Consent of FORVIS, LLP

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.

** 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.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 13, 2023.

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 Chairman and CEO March 13, 2023

A. J. Kazimi (Principal Executive Officer and Director)

/s/ John M. Hamm Senior Director and CFO March 13, 2023

John M. Hamm (Principal Financial and Accounting Officer

/s/ Gordon R. Bernard Director March 13, 2023

Gordon R. Bernard

/s/ James R. Jones Director March 13, 2023

James R. Jones

/s/ Caroline R. Young Director March 13, 2023

Caroline R. Young

/s/ Kenneth J. Krogulski Director March 13, 2023

Kenneth J. Krogulski

/s/ Joseph C. Galante Director March 13, 2023

Joseph C. Galante

/s/ Martin S. Brown, Jr. Director March 13, 2023

Martin S. Brown, Jr.

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, 2022. 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, 2022, the Company’s internal control over financial reporting was effective based on those criteria.

/s/ A. J. Kazimi

A. J. Kazimi

Chief Executive Officer

/s/ John M. Hamm

John M. Hamm

Chief Financial Officer

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 Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Cumberland Pharmaceuticals Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes and schedule (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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, 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 audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Customer Allowances for Chargebacks, Discounts and Damaged Goods, and Accruals for Rebates, Coupons, Product Returns, and Certain Fees

As described in Note 2 to the consolidated financial statements, the allowances against accounts receivable and accrued liabilities for chargebacks, discounts, service fees and expired product returns are determined on a product-by-product basis and established by management as the Company’s best estimate at the time of sale based on each

F-2

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.

As of December 31, 2022, allowances in accounts receivable for chargebacks, cash discounts, and damaged goods were $0.6 million and the estimated liability for rebates, coupons, product returns, and certain fees were $8.3 million. These provisions are recognized concurrently with the sales of products. Provisions for chargebacks involve estimates of usage by retailers and other indirect buyers with varying contract prices for multiple wholesalers. The provision for chargebacks varies in relation to changes in sales volume, product mix, pricing, and the level of inventory at the wholesalers. Provisions are calculated using historical chargeback experience, and/or expected chargeback levels for new products and anticipated pricing changes. Provisions for rebates are recognized based on contractual obligations in place at the time of sales with consideration given to relevant factors that may affect the payment, as well as historical experience for estimated market activity. Provisions for product returns are calculated based on the expiration dates of products sold, the window where customers are permitted to return products, and the history of returns for individual products in relation to the sales volume for each product.

We identified the customer allowances for chargebacks, discounts, and damaged goods and accruals for rebates, coupons, product returns, and certain fees as a critical audit matter. The principal consideration for our determination was the significant measurement uncertainty involved in developing the reserves. Management exercises judgment in computing the amount of sales subject to the allowances and tracks the amount of allowances taken over time. All of this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions, which includes the assumption that historical activity is a good predictor of future allowance activity and modifications made to calculations based on more recent history.

The primary procedures we performed to address this critical audit matter included:

•Tested management’s process for calculating the allowances, including a look back analysis of prior year reserves compared to actual experience in the current year.

•Tested the completeness and accuracy of underlying data used to estimate the accrual by agreeing sales data used in the calculations to reports that were reconciled to the consolidated financial statements, reconciling various allowance percentages to signed customer contracts, and tracing allowance amounts used by various customers during the year to supporting documentation.

•Evaluated the reasonableness of significant assumptions used by management in the computation of selected allowances, including comparison to historical results and considering recent changes in factors that could influence the future allowances to be claimed, such as changes in the shelf life of the products.

•Tested the clerical accuracy of individual customer allowances computed by management and agreeing the total of all estimated allowances to the respective accounts on the consolidated financial statements.

•Developed an independent expectation of the reserve balance for certain allowances and comparing that to the balance recorded on the December 31, 2022, consolidated balance sheet.

•Compared actual activity for chargebacks, discounts, and damaged goods and rebates, coupons, product returns, and certain fees reported after December 31, 2022, to estimated reserves and accruals on the December 31, 2022, consolidated balance sheet.

Valuation of Contingent Consideration, Acquired Intangible Assets and Inventory Associated with Business Combinations

As described in Note 3 to the consolidated financial statements, the Company acquired the U.S. rights to the FDA approved oncology-supportive care medicine Sancuso from Kyowa Kirin, Inc., the U.S. affiliate of Japan-based Kyowa Kirin Co., Ltd. during the year ended December 31, 2022, resulting in the expansion of the Company’s product offerings. This acquisition resulted in additional goodwill of $0.03 million, additional intangible assets of $14.1 million, and contingent liabilities of $5.1 million being recognized on the Company’s consolidated balance

F-3

sheet. As part of this acquisition, management assessed that the acquisition qualified as a business combination and all identifiable assets and liabilities acquired were recorded at fair value as part of the purchase price allocation as of the asset date. The identification and valuation of such acquired assets and assumed liabilities requires management to exercise significant judgment and consider the use of outside vendors to estimate the fair value allocations.

We identified the consummated acquisition and the valuation of acquired assets and assumed liabilities as a critical audit matter. Our principal consideration for this determination included high degree of audit effort, including utilizing individuals with specialized skills, in evaluating management's significant assumptions including its forecasts of future performance of the component, discount rates and other inputs into the model used in computing the fair value of the intangible asset, acquired inventory and contingent consideration liability.

The primary procedures we performed to address this critical audit matter included:

•We obtained an understanding of management’s process for determining the fair value measurements of the contingent consideration, acquired intangible assets and inventory, including reviewing the executed Asset Purchase Agreement documents to gain an understanding of the underlying terms of the consummated acquisition.

•Evaluated forward-looking assumptions, such as forecasted revenue and earnings used by management by performing procedures that included, but not limited to, comparisons to industry and historical performance data, and sensitivity analysis to assess their reasonableness.

•Utilizing a valuation specialist, we evaluated the significant assumptions and methods utilized in developing the fair value of the contingent consideration, acquired intangible assets, and inventory including:

◦Evaluated the reasonableness of the Company’s third-party valuation models and methodologies, expected cash flow calculations, and reviewed significant assumptions.

◦Developed an independent calculation of the discount rates used and compared our rates to those used by management.

◦Prepared an independent calculation of the fair value of the contingent consideration and the intangible assets to test the accuracy of management’s valuation models.

•Reviewing and evaluating the adequacy of the disclosures made in the Company’s SEC filings.

/s/ FORVIS, LLP

(Formerly, BKD, LLP)

We have served as the Company's auditor since 2020.

Nashville, Tennessee

March 13, 2023

F-4

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2022 and 2021

ASSETS

Current assets:

LIABILITIES AND EQUITY

Current liabilities:

Commitments and contingencies

Equity:

Shareholders’ equity:

See accompanying notes to consolidated financial statements.

F-5

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2022 and 2021

Revenues:

Costs and expenses:

Other income - gain on insurance proceeds 611,330 —

Discontinued operations net of tax — 1,994,322

Net loss at subsidiary attributable to noncontrolling interests 79,798 95,212

Earnings (loss) per share attributable to common shareholders:

-Continuing operations-basic $ (0.38) $ (0.37)

-Discontinued operations-basic — 0.13

-Continuing operations-diluted $ (0.38) $ (0.37)

-Discontinued operations-diluted — 0.13

Weighted-average common shares outstanding:

See accompanying notes to consolidated financial statements.

F-6

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2022 and 2021

Cash flows from operating activities:

Deferred tax expense — —

Noncash gain on RediTrex transaction (37,882) —

Gain on receipt of life insurance policies (611,330) —

Gain on forgiveness of debt — (2,187,140)

Net changes in assets and liabilities affecting operating activities:

Cash flows from investing activities:

Proceeds from surrender of life insurance policies — 85,944

Premiums paid for life insurance policies — (33,375)

Life insurance policy proceeds received 877,597 —

Settlement of patent litigation 21,757 —

Note receivable investment funding — (200,000)

F-7

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2022 and 2021

Cash flows from financing activities:

Net increase (decrease) in cash and cash equivalents (7,282,846) 2,287,020

Supplemental disclosure of cash flow information:

Net cash paid during the year for:

Noncash investing and financing activities:

Change in unpaid invoices for offering costs (94,689) (90,512)

RediTrex forgiveness of milestone payable (1,000,000) —

Return of shares related to RediTrex 399,600 —

See accompanying notes to consolidated financial statements

F-8

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Consolidated Statements of Equity

Years ended December 31, 2022 and 2021

Cumberland Pharmaceuticals Inc. Shareholders

Common stock Retained earnings (deficit) Non-controlling interest Total equity

Shares Amount

See accompanying notes to consolidated financial statements

F-9

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 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 millioninvestment 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 $79,798 and $95,212 for the years ended December 31, 2022 and 2021, 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.

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.

F-10

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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. In 2022, the Company made a $25,000 cash contribution to the Foundation.

(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.

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-11

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 $1.5 million and $2.2 million for the years ended December 31, 2022 and 2021, 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.

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.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less. As of December 31, 2022 and 2021, cash equivalents consist primarily of money market funds.

F-12

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 $0.6 million at December 31, 2022 and $0.3 million at December 31, 2021.

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 located in the U.S. and international locations. 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-13

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 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, 2022.

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 and Sancuso acquisitions. 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 Estimated economic life

License rights Term of license agreement

Patents Life of patent

F-14

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 and in January 2022 with the Sancuso acquisition. As a result, the Vibativ and Sancuso components of the Company are the reporting units evaluated for goodwill impairment. Cumberland determined the fair value of the reporting units through current and future estimated revenue and profitability of the product. The Company recorded no impairment charges during 2022 and 2021.

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.

F-15

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

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:

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:

F-16

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

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

F-17

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

Related Party Transactions

In July 2022, Cumberland named Martin S. Brown Jr. to our Board of Directors. Mr. Brown is an attorney with over 30 years of corporate law experience who brings significant legal, public company, health care and civic experience to our board. The Company relies on several law firms for legal advice, including the firm Martin is affiliated. In 2022, the Company paid Martin's law firm $0.04 million.

Discontinued Operations

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 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 19, for additional information.

Recent Accounting Guidance

Recent Accounting Pronouncements 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 adopted 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®, Vibativ® and Sancuso®

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

F-18

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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. During December 2020, Cumberland began distributing RediTrex which also resulted in a $1.0 million milestone payment due to Nordic. The full launch of RediTrex occurred in October 2021.

Effective July 12, 2022, the Company entered into an amendment to our agreement with Nordic whereby they may assume responsibility for RediTrex marketing authorization in the U.S. and the opportunity to commercialize the product in the U.S. after June 30, 2023. Cumberland will continue to distribute and support the product until then.In accordance with the terms of the amendment, Nordic has agreed to return the 180,000 restricted Cumberland shares we previously issued to Nordic which will be cancelled, refund to Cumberland the milestone payment of $1.0 million we made associated with the brand's U.S. approval and issue a credit note in favor of the Company in the amount of $1.0 million for the unpaid milestone payment due from us for launch of the product line. The companies will cooperate on any transition and Cumberland will receive a long-term royalty on any Nordic sales of the product.

Cumberland had approximately $2.6 million in net intangible assets related to RediTrex at December 31, 2021.

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.

In addition, Cumberland agreed to pay a royalty of up to 20% on future net sales of the product after a $2.5 million threshold is met. 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 presents the changes in the Company's Level 3 contingent consideration liability. The contingent consideration earned and accrued in operating expenses is paid to the seller quarterly.

F-19

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Contingent consideration liability

Cash payment of royalty during the period (2,166,682)

Contingent consideration earned and accrued 1,629,506

Cash payment of royalty during the period (1,133,113)

Contingent consideration earned and accrued 876,999

The current portion of the contingent consideration liability is $1.3 million and the non-current portion is $2.8 million, as of December 31, 2022.

Sancuso

On January 3, 2022, Cumberland acquired the U.S. rights to the FDA-approved oncology-supportive care medicine Sancuso from Kyowa Kirin, Inc. ("Kyowa Kirin"), the U.S. affiliate of Japan-based Kyowa Kirin Co., Ltd.

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. 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.

Cumberland acquired U.S. rights to Sancuso and assumed full commercial responsibility for the product in the U.S. – including its marketing, promotion, distribution, manufacturing and medical support activities.

Cumberland has accounted for the transaction as a business combination in accordance with ASC 805 and the product sales are included in the results of operations subsequent to the acquisition date. The Company made an upfront payment of $13.5 million at the closing of the transaction. The Agreement calls for milestone payments of up to $3.5 million based on the attainment of various approvals and sales performance. The Company believes that $1.5 million of the milestone payments will be earned and paid. The remaining milestone of $2.0 million will be paid if and when annual net revenue exceeds $20 million.

In addition, Cumberland has agreed to pay a royalty of up to 10% of on-going net sales of the product.The future royalty payments were required to be recognized at their acquisition-date fair value as a contingent consideration liability, as part of the contingent consideration transferred in the business combination. Cumberland has prepared a valuation of the contingent consideration liability utilizing significant unobservable inputs.As a result, the valuation is classified as Level 3 fair value measurement.

The acquisition was funded by cash and the Company's revolving credit facility.The Company worked with an outside consultant firm to finalize the Sancuso valuation of the transaction.The fair value for the assets and liabilities assumed were as follows: prepaid expenses $1.8 million, inventory $2.6 million, goodwill $0.03 million, intangible assets $14.1 million, milestone payable $1.7 million and contingent liability $3.4 million.

The following table presents the changes in the fair value of the contingent consideration liability that is remeasured on a recurring basis.

F-20

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Cash payment of royalty during the period (1,075,631)

Change in fair value 16,394

Contingent consideration earned and accrued 675,237

The current portion of the contingent consideration liability is $1.7 million and the non-current portion is $1.3 million, as of December 31, 2022.

Sancuso Intangible Assets, Goodwill, Revenue and Earnings

An outside consultant prepared the Sancuso valuation and the valuation is complete. The goodwill of $0.03 million arising from this acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and the acquired company.

Based on discussions with Management, the identified intangible assets were valued as a composite asset referred to as the Sancuso product rights. It is comprised of:

• Technology – patented and unpatented IP and know-how;

• Marketing intangible assets including product trademarks/names/dress; and

• Customer base to which the product is sold.

It is a common practice in the life sciences industry to value intangible assets under a portfolio approach given the nature of the intangible assets and facts and circumstances that are common to the industry. The Goodwill amount to be deducted for tax purposes is expected to be $0.03 million and will be amortized over 15 years.

Sancuso was acquired on January 3, 2022. For the year ended December 31, 2022, the amounts included in the income statement for revenue and operating profit were $13.6 million and $6.6 million, respectively.

On a pro-forma basis, the revenue and earnings of the combined entity as though the business combination had occurred in 2021 appears below:

Cumberland 2022 Results Pro-forma 2021 Results

The 2021 pro-forma results include results for Sancuso as provided by the management of Kyowa Kirin. The Seller is a pharmaceutical company similar to Cumberland. The 2021 results for Sancuso as reported by Kyowa Kirin reflect accounting methodology and reporting which were similar to those employed by the Company.

The Company’s 2022 balance sheet reflects the full year impact of the Sancuso acquisition, as the acquisition occurred on January 3, 2022.

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:

Other Revenues

The Company has agreements with international partners for commercialization of the Company's products with associated payments included in other revenues. Those agreements provide that each of the partners 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 $1.5 million in non-refundable up-front payments, milestone payments of up to $2.4 million related to regulatory approvals and up to $5.6 million in payments related to product sales. From 2012 through December 31, 2022, the Company has recognized a cumulative $1.9 million in upfront payments as other revenue and has recognized $0.5 million during the year 2022.

Other revenues during 2022 and 2021 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 $0.2 million and $0.4 million for the years ending December 31, 2022 and 2021, respectively.

F-22

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(5) Inventories

The Company's net inventories consisted of the following as of December 31:

At December 31, 2022 and 2021, the Company had recognized and maintained cumulative net realizable value charges for potential obsolescence and discontinuance losses of approximately $0.5 million and $1.4 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, 2022 and 2021. Consigned inventory represents Authorized Generic inventory stored with Padagis 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. The Vibativ non-current API inventory was $7.1 million at December 31, 2022 and $8.1 million at December 31, 2021. The Company had no Vibativ finished goods included in the non-current inventories at December 31, 2022, and $0.5 million at December 31, 2021. At December 31, 2022 and 2021, Cumberland had $0.3 million in non-current inventory for API related to its ifetroban clinical initiatives and $0.1 million of finished goods

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:

Less: accumulated depreciation and amortization (2,085,185) (3,792,153)

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:

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, 2022 and 2021.

Product and license rights include assets associated with the Company's acquired products, including those discussed in Note 3, RediTrex, Vibativ and Sancuso. RediTrex is only represented in 2021.

During 2022 and 2021, the Company recorded an additional $0.2 million in each year in intangible assets for patents, trademarks and capitalized patent costs, including amounts incurred in the protection of the Company's intellectual property. The Company also recorded an additional $14.1 million in product rights and $0.03 million in goodwill related to the Sancuso acquisition. 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:

The expected amortization expense for the Company's current balance of intangible assets are as follows:

Year ending December 31:

F-25

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(8) Other Current and Other Long-term Liabilities

Other current liabilities consisted of the following at December 31:

Sancuso related liabilities 2,226,725 —

Current portion of accrued contingent consideration 3,006,310 2,685,531

Current deferred charges 614,551 —

Non-current portion of accrued contingent consideration $ 4,931,513 $ 3,830,096

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.

In 2022, the Company and Pinnacle Bank agreed to modify the financial covenants to align with the current use of the line of credit. On September 29, 2022, the Company entered into the Ninth Amendment to the Revolving Credit Loan Agreement with Pinnacle Bank (as amended, the "Pinnacle Agreement") to update the Funded Debt Ratio to mean the ratio of (i) Funded Debt less the amount of Unrestricted Cash in excess of $8,500,000, to (ii) EBITDA, as determined at the end of each fiscal quarter on a rolling four (4) quarter basis. For the year ended December 31, 2022, we were in compliance with the Funded Debt Ratio financial covenant.

The Company had $16.2 million and $15.0 million in borrowings outstanding under the Pinnacle Agreement at December 31, 2022 and 2021, respectively.

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 6.875% at December 31, 2022). 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. It is expected that SOFR will become the replacement benchmark.

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, 2021.

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.

F-27

CUMBERLAND PHARMACEUTICALS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

(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, 2022 and 2021, there was no preferred stock outstanding.

During 2022 and 2021, the Company issued 171,655 shares and 192,684 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 2022 and 2021.

(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 367,793 shares and 438,359 shares of common stock for approximately $1.0 million and $1.4 million during the years ended December 31, 2022 and 2021, respectively. There remains $3.8 million available under the current repurchase program available for share repurchases at December 31, 2022.

F-28

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:

Numerator:

Net income (loss) from continuing operations $ (5,650,039) $ (5,597,121)

Net loss at subsidiary attributable to noncontrolling interests 79,798 95,212

Denominator:

CPIX US Equity

CPIX · 10-K · period ended 2022-12-31

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.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CPIX US Equity☆

CPIX · 10-K · period ended 2022-12-31

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.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

CPIX US Equity