Leases

6 Months Ended

Jun. 30, 2023

On November 15, 2021, Cumberland entered into a lease (the "Lease"), pursuant to which the Company leases approximately 16,903 rentable square feet of space (the "Leased Premise") at Broadwest located in Nashville, Tennessee with 1600 West End Avenue Partners, LLC (the "Landlord"). The Leased Premise serves as the Company's new corporate headquarters. The initial term of the Lease is one hundred fifty-seven (157) months, with two consecutive options to renew for a period of five years each, with the commencement date of October 25, 2022. This lease currently expires in November 2035.

The Company is responsible for paying rent to the Landlord under the Lease beginning three months after the commencement date. The Company pays a base rent of $33.06 per square foot of rentable space with a gradual rental rate increase of 2.5% for each year thereafter of the prior year's base rental. In addition to the monthly base rent, the Company is responsible for its percentage share of the operating expenses of the building. The Lease also provides for a tenant improvement allowance for the space.

In addition, the Company's operating leases also include the lease of approximately 14,200 square feet of wet laboratory and office space in Nashville, Tennessee by CET, our majority-owned subsidiary, where it operates the CET Life Sciences Center. The research lab space at CET, under an agreement amended in July 2012, is leased through April 2028. The Company also subleases a portion of the space under this lease.

Operating lease liabilities were recorded as the present value of remaining lease payments not yet paid for the lease term discounted using the incremental borrowing rate associated with each lease. Operating lease right-of-use assets represent operating lease liabilities adjusted for lease incentives and initial direct costs. As the Company’s leases do not contain implicit

borrowing rates, the incremental borrowing rates were calculated based on information available at January 1, 2019 and October 25, 2022. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms. The weighted-average remaining lease term for the Broadwest and CET leases is 10.9 years at June 30, 2023. The weighted-average incremental borrowing rate used to discount the present value of the remaining lease payments is 9.28% for the Broadwest lease and 9.9% for the remaining CET lease. Also included as a ROU asset is an embedded lease of $0.9 million related to our new manufacturer for Vaprisol.

Lease Position

At June 30, 2023 and December 31, 2022, the Company's lease assets and liabilities were as follows:


Right-of-Use Assets	June 30, 2023		December 31, 2022
Operating lease right-of-use assets	$	6,831,502	$	5,218,403


Lease Liabilities	June 30, 2023		December 31, 2022
Operating lease current liabilities	$	320,837	$	172,910

Operating lease noncurrent liabilities	5,477,040		4,586,301
Total	$	5,797,877	$	4,759,211

As of June 30, 2023, cumulative future minimum sublease income under non-cancelable operating subleases totals approximately $1.8 million and will be paid through the leases ending in April 2028. Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows:


Maturity of Lease Liabilities at June 30, 2023	Operating Leases
2023	422,975
2024	863,320
2025	836,100
2026	909,911
2027	934,180
After 2027	5,588,192
Total lease payments	9,554,678
Less: Interest	3,756,801
Present value of lease liabilities	$	5,797,877

Rent expense is recognized over the expected term of the lease, including renewal option periods, if applicable, on a straight-line basis as a component of general and administrative expense. Rent expense and sublease income were as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Rent expense	$	226,772	$	285,963	$	501,029	$	574,071

Sublease income	$	130,842	$	161,804	$	245,499	$	296,237