What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-14 compared with 2020-05-22 · 165 added, 91 removed, 194 unchanged (57% of the section changed)

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Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

We caution you that our actual results may differ significantly from the results we discuss in these forward-looking statements.

Actual results may differ significantly from the results discussed in these forward-looking statements.

Some important factors which may cause results to differ from expectations include:

availability of additional debt and equity capital required to finance the business model;

availability of additional debt and equity capital;

market conditions at the time additional capital is required;

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While forward-looking statements reflect our beliefs and best judgment based upon current information, they are not guarantees of future performance.

Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report on Form 10-K”) and other filings with the SEC.

Other important factors that may cause actual results to differ materially from forward-looking statements are discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and other filings with the SEC.

We do not undertake to publicly update or revise any of our forward-looking statements, even in the event that experience or future changes indicate that the anticipated results will not be realized.

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Cumberland's growth strategy involves maximizing the potential of our existing brands while continuing to build a portfolio of differentiated products.

We currently market seven FDA-approved products in the United States.

We currently market six FDA-approved products in the United States and expect to market our seventh product, RediTrex, before the end of 2020.

Through our international partners, we are working to bring our medicines to patients in their countries.

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Build an international contribution to our business.

We have established our own commercial capabilities, including two sales divisions to support and promote our approved brands in the U.S.

We have also established agreements with a group of international partners to register our products and make them available to patients in their countries.

We will continue to support and selectively expand our network of international partners while supporting their registration and commercialization efforts in their respective territories.

We have established our own commercial capabilities, including two sales divisions to promote our approved brands in the U.S.

We have also entered into agreements with a group of international partners to register our products and make them available to patients in their countries.

The acquisition of Vibativ resulted in several new international partners and market opportunities.

We will continue to support and selectively expand our network of international partners, while assisting with the registration and commercialization efforts in their respective territories.

Manage our operations with financial discipline.

We continually work to manage our expenses in line with our revenues in order to deliver positive cash flow from operations.

We work to manage our expenses in line with our revenues in order to deliver positive cash flow from operations.

Our goal is to maintain a healthy financial position, with favorable gross margins, and a strong balance sheet.

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These filings are also available to the public at www.sec.gov .

In April 2020, we issued our inaugural Environmental, Social and Governance (“ESG”) report which is also available on our website.

RECENT DEVELOPMENTS

Next Generation Caldolor Product

In January 2020, we launched the next generation of our Caldolor ( ibuprofen ) Injection product.

This formulation of Caldolor comes in a ready-to-use bag that may be administered without dilution for pain relief.

This launch follows FDA approval in 2019 of the product's new delivery method.

A non-steroidal anti-inflammatory drug (“NSAID”), Caldolor may be used as the sole method of treatment for mild-moderate pain or as part of a multimodal treatment for severe pain.

The new formulation of Caldolor comes in a pre-mixed bag containing 800 mg of ibuprofen in a 200 mL patented low-sodium formulation for injection that is ready to use.

It is the first FDA-approved pre-mixed bag of ibuprofen.

Caldolor is still available as an 800 mg/8mL single–dose vial (100mg/mL) for dilution in addition to the ready-to-use bag (4 mg/mL).

The new, premixed presentation provides health care professionals a formulation that is easy to administer, helping to manage the treatment of patient pain and fever, while reducing opioid consumption.

Caldolor Pediatric Study

We previously received FDA approval for the use of Caldolor in pediatric patients six months of age and older.

Caldolor is the first and only injectable NSAID approved for use in children.

We then initiated a study to collect data on the use of Caldolor in children ranging in age from birth up to six months of age.

Enrollment in that multi-center study was completed in 2019.

In March 2020, we announced topline results that indicated the use of Caldolor was well tolerated in these young children from birth up to six months of age.

Next steps include finalizing the full study report for submission to the FDA and then determining whether an additional pediatric indication will be available.

COVID-19 Pandemic

During March 2020, the U.S.

In March 2020, the U.S.

declared a health care emergency following the outbreak of the (SARS-CoV-2) strain of coronavirus that causes COVID-19, a respiratory illness.

We are monitoring this situation both in the U.S.

and internationally, so we can maintain our employees’ safety and well-being, while also keeping our business operating and secure.

Cumberland has remained open for business, as we are considered to be essential by the United States Department of Homeland Security.

All of our corporate and CET employees have been given the opportunity to work remotely, and those that wish to work from the office are encouraged to practice the behaviors outlined by the Centers for Disease Control.

Our sales organization has continued to make calls on medical professionals, providing information and product samples as requested.

We have implemented measures to address the impact of the novel coronavirus on our business and taken appropriate action to protect our employees, secure our supply chain, and support the patients who can benefit from our medicines.

All our corporate, sales and CET employees have been provided the opportunity to work remotely, and those who wish to work at our offices are encouraged to follow the health guidelines outlined by the Centers for Disease Control.

Our sales organization has continued to interact with medical professionals, providing information and product samples as requested.

However, their contact has largely shifted from in person to telephonic and electronic communications.

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Given the uncertainty, magnitude and impact of such changes, the Company is unable to quantify the impact on our future results as of the date of this filing.

We continue to monitor the coronavirus situation both in the U.S.

and internationally in order to maintain our employees’ safety and well-being, while also keeping our business operating.

Acute Care Product Special Supply Arrangements

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This initiative increases the availability of Vaprisol ® to hospitals and clinics including special supply and financial arrangements, with favorable pricing and payment terms, to help ensure timely access to Vaprisol during this health care crisis.

Vibativ Clinical Manuscripts

In May 2020, Cumberland announced a new study published in Drugs - Real World Outcomes , detailing the positive clinical outcomes that resulted from treating patients with bacteremia or endocarditis with Vibativ.

This publication is a sub analysis of The Telavancin Observational Use Registry (TOUR™), a study conducted to record population characteristics, prescription information, and real-world clinical outcomes of patients with Gram-positive infections treated with Vibativ.

The analysis suggests Vibativ is a promising and viable option for patients with bacteremia or endocarditis, including those with MRSA or another S.

aureus pathogen.

Additionally, in May 2020, we announced the publication of two studies confirming the continued in vitro potency of telavancin.

Both publications were part of continued surveillance of telavancin activity since 2011.

The first publication tested a global collection of 24,408 Gram-positive clinical isolates, and the second publication tested a U.S.

collection of 15,882 S.

aureus isolates.

Both studies documented the sustained in vitro antimicrobial activity and spectrum of telavancin—many years after its clinical approval—against Gram-positive clinical isolates collected worldwide over 7 years, from 2011 through 2017.

Vibativ is a patented, FDA-approved injectable anti-infective for the treatment of certain serious bacterial infections including hospital-acquired and ventilator-associated bacterial pneumonia and complicated skin and skin structure infections.

It addresses a range of Gram-positive bacterial pathogens, including those that are considered difficult-to-treat and multidrug-resistant.

In November 2018, Cumberland reached an agreement to acquire Vibativ from Theravance Biopharma and assume global responsibility for the product.

Environmental, Social and Governance (ESG) Activities

In April 2020, we released our first Sustainability Report.

This report describes the Company’s activities pertaining to Environmental, Social and Governance (“ESG”) matters, otherwise known as corporate sustainability.

It includes details about Cumberland’s community involvement, ethical marketing, and drug safety.

Our board appointed Caroline R.

Young, former president of the Nashville Health Care Council, as the company’s first ESG board director.

The report notes that, during 2019, Cumberland provided nearly 4 million patient doses of products, safely disposed of over 9,700 pounds of expired and damaged products and had no product recalls.

We also had no product listings on the FDA’s Safety Alerts Database and no products identified in the FDA Adverse Event Reporting System during 2019.

Paycheck Protection Program

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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.

The Company intends to use the majority of the loan amount for such qualifying expenses.

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 we have used the loan amount for such qualifying expenses.

We applied for this loan after carefully considering, with our bank, the eligibility criteria to participate in this program, and determining that Cumberland met these criteria.

We evaluated and provided information on our payroll and other qualifying expenses to determine the amount of PPP funds to apply for.

Cumberland has not laid off or furloughed any employees as a result of the COVID-19 pandemic and, thanks to assistance from our PPP loan, we currently do not foresee doing so.

The company will continue to monitor and evaluate changes to this program as they emerge and will take appropriate action, if necessary.

Environmental, Social and Governance (ESG) Activities

In April 2020, we released our first Sustainability Report.

This report describes the Company’s activities pertaining to Environmental, Social and Governance ("ESG") matters, otherwise known as corporate sustainability.

It includes details about Cumberland’s community involvement, ethical marketing and drug safety.

Our board appointed Caroline R.

Young, former president of the Nashville Health Care Council, as the company’s first ESG board director.

The report notes that, during 2019, Cumberland provided nearly 4 million patient doses of products, safely disposed of over 9,700 pounds of expired and damaged products and had no product recalls.

We also had no product listings on the FDA’s Safety Alerts Database and no products identified in the FDA Adverse Event Reporting System during 2019.

Cumberland has not laid off or furloughed any employees as a result of the COVID-19 pandemic and, based on assistance from our PPP loan, we currently do not foresee doing so.

We will continue to monitor and evaluate changes to this program as they emerge and will take appropriate action, if necessary.

Ifetroban Phase II Clinical Programs

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

Enrollment in our clinical studies declined during the first quarter due to the COVID-19 pandemic.

Enrollment in our clinical studies declined during the first and second quarters of 2020 due to the COVID-19 pandemic.

While enrollment of new patients is currently limited, we are working to ensure that patients already entered into a trial continue to receive their study drug.

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RESULTS OF OPERATIONS

Three months ended March 31, 2020 compared to the three months ended March 31, 2019

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended March 31, 2020 and 2019:

Three months ended March 31,

Three months ended June 30, 2020 compared to the three months ended June 30, 2019

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2020 and 2019:

Three months ended June 30,

2020 2019 Change

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The following table summarizes net revenues by product for the periods presented:

Three months ended March 31,

Three months ended June 30,

2020 2019 Change

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Net revenues.

Net revenues for the three months ended March 31, 2020 were $8.3 million compared to $8.7 million for the three months ended March 31, 2019.

As detailed in the table above, net revenue increased for two of our marketed products:

Kristalose and Vibativ during the quarter.

There were decreases in Acetadote, Omeclamox-Pak, Vaprisol and Caldolor net revenue.

Net revenues for the three months ended June 30, 2020, were $9.6 million compared to $9.4 million for the three months ended June 30, 2019.

As detailed in the table above, net revenue increased for three of our marketed products:

Vibativ, Caldolor, and Kristalose during the quarter.

There were decreases in Acetadote, Omeclamox-Pak and Vaprisol.

We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective January 1, 2020.

As a result, the 2019 revenues and expenses associated with the products are combined and reclassified into discontinued operations in our financial statements.

In exchange for the return of these product license rights and not competing with either product, Cumberland will receive $5 million in financial consideration paid over the two-years following the return date.

The first installment of $0.8 million due from Clinigen was recorded during the three months ended March 31, 2020 as discontinued operations.

In exchange for the return of these product license rights and associated not-compete provisions, Cumberland is receiving $5 million in financial consideration paid over the two-years following the return date.

The second installment of $0.8 million due from Clinigen was recorded during the three months ended June 30, 2020, as discontinued operations.

We do not incur expenses associated with these payments from Clinigen.

Kristalose revenue increased slightly during the first quarter of 2020 when compared to the prior year period.

The increase was primarily the result of improved net pricing for the product.

Vibativ revenue was $2.4 million for the three months ended March 31, 2020, an increase of $0.4 million over the same period last year.

The increase was a result of improved sales volumes and improved net pricing for the product.

Vaprisol revenue was $0.2 million for the first quarter of 2020, a decrease of net sales of $0.1 million compared to the first quarter of 2019 primarily due to lower sales volumes.

Omeclamox-Pak revenue decreased $0.1 million for the first quarter of 2020 compared to the first quarter of 2019 primarily due to a decrease in sales volumes, partially offset by a reduction in expired product returns.

Vibativ revenue was $3.3 million for the three months ended June 30, 2020, an increase of $0.7 million over the same period last year.

The 26.9% increase was a result of improved sales volumes.

Kristalose revenue increased slightly during the second quarter of 2020, when compared to the prior year period.

The increase was primarily the result of increased sales volumes for the product.

Vaprisol revenue was $0.2 million for the second quarter of 2020, and this slight decrease of net sales compared to the second quarter of 2019 is primarily due to lower sales volumes.

Omeclamox-Pak revenue decreased $0.5 million for the second quarter of 2020, compared to the second quarter of 2019, primarily due to a decrease in sales volumes.

Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic.

During the quarter, there was a decrease of $0.1 million in the product's revenue when compared to the prior year period as a result of lower sales volumes, partially offset by improved net pricing.

Caldolor revenue was $1.1 million for the first quarter of 2020, a decrease of $0.2 million compared to the same period last year.

While there were higher domestic shipments of the product and improved net pricing, these improvements were offset by a reduction in international shipments of Caldolor when compared to the prior year period.

During the quarter, there was a decrease of $0.4 million in the product's revenue when compared to the prior year period as a result of lower sales volumes.

Caldolor revenue was $1.2 million for the second quarter of 2020, an increase of $0.1 million compared to the same period last year.

The improvement in net revenue was the result of an increase in international shipments of Caldolor when compared to the prior year period, which were partially offset by lower domestic shipments of the product, significantly impacted by COVID - 19 and a reduction in elective surgeries.

Cost of products sold .

Co st of products sold for the first quarter of 2020 and 2019 were $1.6 million and $1.7 million, respectively.

Cost of products sold, as a percentage of net revenues, were 19.6% during the three months ended March 31, 2020 compared to 19.0% during the three months ended March 31, 2019.

This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix.

Co st of products sold for the second quarter of 2020 and 2019 were $2.6 million and $1.8 million, respectively.

Cost of products sold, as a percentage of net revenues, were 27.2% during the three months ended June 30, 2020, compared to 19.0% during the three months ended June 30, 2019.

This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix, particularly the increase in sales of Vibativ.

Selling and marketing .

Selling and marketing expense for the first quarter of 2020 increased $0.3 million compared to the prior year period.

This increase is primarily attributable to increases in salaries as well as a non-cash expense related to the decrease in the fair value of Cumberland owned life insurance.

These increases were partially offset by decreases in royalty costs during the first quarter of 2020.

Selling and marketing expense for the second quarter of 2020 decreased $0.1 million compared to the prior year period.

This decrease is primarily attributable to decreases in direct sales promotion costs and travel expenses.

There were partially offsetting increases in salaries and royalty costs during the quarter.

Research and development .

Research and development costs were $1.7 million for the first quarter of 2020 and $1.4 million for the same period last year.

Research and development costs were $1.4 million for the second quarter of 2020 and $1.7 million for the same period last year.

A portion of our research and development costs is variable based on the number of trials, study sites, cost of the per patient study protocol and patients involved in the development of our new product candidates.

We continue to fund our ongoing clinical initiatives associated with our pipeline products.

The increase in costs were primarily the result of increased annual FDA user fees.

The decrease in costs were primarily the result of decreased study activity as well as decreases in the costs of our medical science liaison activities partially offset by increases in our annual FDA user fees.

General and administrative .

General and administrative expense for the first quarter of 2020 decreased to $2.0 million from $2.5 million during the first quarter of 2019 as a result of decreases in advisory, legal and professional fees.

General and administrative expense for the second quarter of 2020 decreased to $2.2 million from $2.3 million during the second quarter of 2019 as a result of decreases in advisory and professional fees as well as a reduction in non-cash stock based compensation during the period.

These decreases were partially offset by increases in salary and business development legal costs.

Amortization.

Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs.

Amortization for the three months ended June 30, 2020, and three months ended June 30, 2019, totaled approximately $1.1 million and $1.0 million, respectively.

Income taxes .

Income tax expense for the three months ended June 30, 2020, was comparable to the income tax expense for the three months ended June 30, 2019.

As of June 30, 2020, we had approximately $44 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options that have historically been used to significantly offset income tax obligations.

We expect to continue to pay minimal income taxes during 2020 and beyond, through the continued utilization of these net operating loss carryforwards, on any taxable income generated from our operations.

RESULTS OF OPERATIONS

Six months ended June 30, 2020 compared to the six months ended June 30, 2019

The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2020 and 2019:

Six months ended June 30,

2020 2019 Change

Net revenues $ 17,928,911 $ 18,147,303 $ (218,392)

Costs and expenses:

Cost of products sold 4,244,163 3,451,082 793,081

Selling and marketing 7,573,082 7,419,311 153,771

Research and development 3,144,057 3,115,856 28,201

General and administrative 4,227,048 4,807,057 (580,009)

Amortization 2,167,524 2,051,353 116,171

Total costs and expenses 21,355,874 20,844,659 511,215

Operating income (loss) (3,426,963) (2,697,356) (729,607)

Interest income 58,549 246,426 (187,877)

Interest expense (152,520) (152,111) (409)

Income (loss) from continuing operations before income taxes (3,520,934) (2,603,041) (917,893)

Income tax (expense) benefit (41,695) 76,966 (118,661)

Net income (loss) from continuing operations $ (3,562,629) $ (2,526,075) $ (1,036,554)

The following table summarizes net revenues by product for the periods presented:

Six months ended June 30,

2020 2019 Change

Acetadote $ 1,308,711 $ 1,832,976 $ (524,265)

Omeclamox-Pak 124,371 678,141 (553,770)

Kristalose 6,771,433 6,785,050 (13,617)

Vaprisol 382,016 499,202 (117,186)

Caldolor 2,261,286 2,372,599 (111,313)

Vibativ 5,721,708 4,659,471 1,062,237

Other revenue 1,359,386 1,319,864 39,522

Total net revenues $ 17,928,911 $ 18,147,303 $ (218,392)

Net revenues.

Net revenues for the six months ended June 30, 2020, were $17.9 million compared to $18.1 million for the six months ended June 30, 2019.

As detailed in the table above, net revenue increased for our marketed product Vibativ during the first six months of 2020.

The overall 1.2% revenue decrease was the result of decreases in our other products.

We returned the exclusive rights to commercialize Ethyol and Totect in the United States to Clinigen effective January 1, 2020.

As a result, the 2019 revenues and expenses associated with the products are combined and reclassified into discontinued operations in our financial statements.

In exchange for the return of these product license rights and associated non-compete provision, Cumberland is receiving $5 million in financial consideration paid over the two-years following the return date.

The first two installments totaling $1.5 million due from Clinigen was recorded during the six months ended June 30, 2020, as discontinued operations.

We do not incur expenses associated with these payments from Clinigen.

Vibativ revenue was $5.7 million for the six months ended June 30, 2020, an increase of $1.1 million over the same period last year.

The 22.8% increase in net revenue was a result of improved sales volume for the product.

Kristalose revenue was $6.8 million during the first six months of 2020, consistent with the prior year period.

Vaprisol revenue was $0.4 million for the first six months of 2020, which is a decrease of net sales of $0.1 million compared to the first six months of 2019 primarily due to lower sales volumes.

Omeclamox-Pak revenue decreased $0.6 million for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to a decrease in sales volumes.

Acetadote revenue includes net sales of our Acetadote brand and our share of net sales from our Authorized Generic.

There was a decrease of $0.5 million in the product's year to date revenue for the six months ended June 30, 2020, when compared to the prior year period as a result of lower sales volumes, partially offset by improved net pricing.

Caldolor revenue was $2.3 million for the first two quarters of 2020, a decrease of $0.1 million compared to the same period last year.

There were lower domestic shipments of the product, that were significantly impacted by COVID - 19 and a reduction in elective surgeries.

These lower domestic sales were partially offset by an increase in international shipments of Caldolor when compared to the prior year period.

Cost of products sold .

Co st of products sold for the first six months of 2020 and 2019 were $4.2 million and $3.5 million, respectively.

Cost of products sold, as a percentage of net revenues, were 23.7% during the six months ended June 30, 2020, compared to 19.0% during the six months ended June 30, 2019.

This change in costs of products sold as a percentage of revenue was attributable to a change in the product sales mix, particularly the increase in sales of Vibativ.

Selling and marketing .

Selling and marketing expense for the six months ended June 30, 2020, increased $0.2 million compared to the prior year period.

This increase is primarily attributable to increases in salaries as well as an increase in the non-cash expense related to the decrease in the fair value of Cumberland owned life insurance.

These increases were partially offset by decreases in royalty costs, direct sales promotion costs and travel expenses.

Research and development .

Research and development costs were $3.1 million for both the first six months of 2020 and for the same period last year.

We continue to fund our ongoing clinical initiatives associated with our pipeline products.

We experienced a decrease in study activity offset by increases in our annual FDA user fees.

General and administrative .

General and administrative expense for the six months ended June 30, 2020, decreased to $4.2 million from $4.8 million during the six months ended June 30, 2019 as a result of decreases in advisory, legal and professional fees.

We also experienced a reduction in non-cash stock based compensation during the period.

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Amortization expense is the ratable use of our capitalized intangible assets including product and license rights, patents, trademarks and patent defense costs.

Amortization for the three months ended March 31, 2020, and three months ended March 31, 2019, totaled approximately $1.1 million and $1.0 million, respectively.

Amortization for the six months ended June 30, 2020, and six months ended June 30, 2019, totaled approximately $2.2 million and $2.1 million, respectively.

Income taxes .

Income tax expense (benefit) for the three months ended March 31, 2020, as a percentage of income (loss) from continuing operations before income taxes, was 1.9% for the three months ended March 31, 2020, compared to (6.4)% for the three months ended March 31, 2019.

As of March 31, 2020, we had approximately $44 million of net operating loss carryforwards resulting from the exercise of nonqualified stock options that have historically been used to significantly offset income tax obligations.

Income tax expense (benefit) for the six months ended June 30, 2020, as a percentage of loss from continuing operations before income taxes, was 1.2%, compared to (3.0)% for the six months ended June 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity are cash flows provided by our operations, the proceeds from the Paycheck Protection Program loan, 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, including its recent expansion to $20 million, will be adequate to finance internal growth, finance business development initiatives, and fund capital expenditures for the foreseeable future.

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.

We invest a portion of our cash reserves in marketable securities including short-term cash investments, U.S.

Treasury notes and bonds, corporate bonds and commercial paper.

At March 31, 2020 and December 31, 2019, all our investments were in commercial paper with 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 March 31, 2020 and December 31, 2019:

March 31, 2020 December 31, 2019

At June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019:

June 30, 2020 December 31, 2019

Cash and cash equivalents $ 27,373,737 $ 28,212,635

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Revolving line of credit availability $ 3,000,000 $ 1,500,000

The following table summarizes our net changes in cash and cash equivalents for the three months ended March 31, 2020 and March 31, 2019:

Three months ended March 31,

The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2020 and June 30, 2019:

Six months ended June 30,

Net cash provided by (used in):

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Net decrease in cash and cash equivalents $ (838,898) $ (6,987,780)

The net $1.2 million decrease in cash and cash equivalents for the three months ended March 31, 2020 was primarily attributable to cash used in investing and financing activities.

Cash provided by operating activities of $0.9 million was positively impacted by decreases in accounts receivable of $2.0 million and inventory of $0.7 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $1.4 million.

This was partially offset by a decrease in accounts payable of $2.4 million.

Cash used by investing activities was the result of additions to intangibles of $0.5 million.

Our financing activities reflected the $0.4 million in cash used to repurchase shares of our common stock as well as the $0.8 million used for the repurchase of subsidiary shares.

The net $3.3 million decrease in cash and cash equivalents for the three months ended March 31, 2019 was attributable to cash used in investing, financing and operating activities.

Cash used in operating activities of $0.4 million was primarily impacted by the increase in accounts receivable of $2.1 million.

The use of operating cash was partially offset by the add back of non-cash expenses of depreciation and amortization and share-based compensation expense totaling $1.4 million.

Cash used in investing activities included net cash invested in marketable securities of $1.3 million and additions to intangibles of $0.4 million.

The net $0.8 million decrease in cash and cash equivalents for the six months ended June 30, 2020, was primarily attributable to cash used in investing and financing activities.

Cash provided by operating activities of $3.7 million was positively impacted by decreases in inventory of $1.2 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.9 million.

Cash used by investing activities was the result of additions to intangibles of $0.7 million and equipment of $0.1 million.

Our financing activities included the net repayment of $1.5 million on our revolving line of credit, the $1.2 million in cash used to repurchase shares of our common stock as well as the $0.8 million used for the repurchase of subsidiary shares.

The net $7.0 million decrease in cash and cash equivalents for the six months ended June 30, 2019 was attributable to cash used in investing and financing activities, partially offset by the $1.5 million in cash provided by operating activities.

Cash provided by operating activities of $1.5 million was positively impacted by the decrease in inventory of $0.8 million as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $2.9 million.

Cash used in investing activities included the $5.0 million payment to Theravance as part of the acquisition of Vibativ.

Cash used in investing activities also included net cash invested in marketable securities of $1.1 million and additions to intangibles of $0.4 million.

Our financing activities reflected the $1.2 million in cash used to repurchase shares of our common stock.

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Both Third Amendment modifications were related to the Vibativ transaction.

We were in compliance with the Tangible Capital Ratio financial covenant as of March 31, 2020.

We were in compliance with the Tangible Capital Ratio financial covenant as of June 30, 2020.

We expect to maintain compliance with the Tangible Capital Ratio financial covenant in future periods.

Paycheck Protection Program Loan

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.

For a summary of the material terms of the Paycheck Protection Program loan, see Note 7 to the accompanying unaudited condensed consolidated financial statements.

UUnder 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 we have used the loan amount for such qualifying expenses.

OFF-BALANCE SHEET ARRANGEMENTS

During the three months ended March 31, 2020 and 2019, we did not engage in any off-balance sheet arrangements.

During the six months ended June 30, 2020 and 2019, we did not engage in any off-balance sheet arrangements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis