What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-13 compared with 2020-08-14 · 144 added, 110 removed, 249 unchanged (50% of the section changed)

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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, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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 Reports on Form 10-Q for the quarters ended March 31, 2020 and September 30, 2020, respectively, 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 six FDA-approved products in the United States and expect to market our seventh product, RediTrex, before the end of 2020.

We currently market six FDA-approved products in the United States and expect to introduce 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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We will continue to explore opportunities for label expansion to bring our products to new patient populations.

As examples, we have secured pediatric approval, expanding the labeling for both our Acetadote and Caldolor brands.

As examples, we have secured pediatric approvals, expanding the labeling for both our Acetadote and Caldolor brands.

Selectively add complementary brands.

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

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

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.

Cumberland’s facilities have remained open, as our business is considered to be essential by the United States Department of Homeland Security.

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

All our employees have been provided the opportunity to work remotely, and those who wish to work at our offices are asked 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.

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

Travel across the organization and attendance at medical meetings have largely been discontinued.

Cumberland has faced the same headwinds affecting other companies that rely on hospital admissions and patient visits to drive revenue.

During this pandemic, less patients sought care, some patients postponed elective surgeries and Cumberland's access to medical facilities was substantially limited.

We rely on third-party organizations around the world to supply components, manufacture and distribute our products.

We are aware that we may experience revenue loss, supply interruptions, time delays and incur unplanned expenses as a result of the impact of the ongoing COVID-19 pandemic.

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

In March 2020, Cumberland announced an initiative to expand the availability of Vibativ ® along with special financial arrangements for hospitals and clinics to help ensure supply during this unprecedented health care crisis.

In addition, we sponsored a national program with infectious disease experts to provide information on the management of complicated respiratory infections resulting from COVID-19.

Also in March 2020, we announced an initiative to expand the availability of Caldolor ® with special supply and financial arrangements, including favorable pricing and payment terms for hospitals and clinics to help ensure timely access to Caldolor during this health care crisis.

Additionally, in April 2020, the Company announced a third COVID-19-related initiative.

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.

Given the uncertainty of such changes, we are unable to quantify the impact on our future results as of the date of this filing.

For additional discussion of the risks associated with COVID-19, please review the section entitled “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Omeclamox-Pak Supply Update

Cumberland has partnered with a select group of FDA-approved facilities to manufacture its line of branded pharmaceutical products.

The Company has been carefully monitoring its supply chain during the pandemic and preparing for its economic impact.

The packager for Cumberland’s Omeclamox-Pak product encountered financial difficulties due to the impact of COVID-19, and their operations are currently suspended.

Cumberland is awaiting resumption of those operations while also exploring other alternatives to restart the product’s packaging.

Meanwhile, we informed the FDA of a shortage of the Omeclamox-Pak effective October 14, 2020, and have not provided a date for the availability of new inventory.

Cumberland noted that there is currently some remaining inventory of the product in the distribution channels.

For additional discussion of the risks discussed above, see Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q.

Caldolor Clinical Manuscripts

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

In January 2020, we commenced the national launch of our next generation 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.

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

In July 2020, Cumberland announced a study published in the Journal of Orthopedic Trauma , evaluating the efficacy of Caldolor administration in the management of acute pain in orthopedic trauma patients.

The study also measured Caldolor’s ability in minimizing opioid use.

This single-center, randomized, double-blind, placebo-controlled study found that Caldolor (ibuprofen) Injection reduced the quantity of opioids required to manage pain after a traumatic injury with fracture.

In addition, the time to first narcotic medication was longer in the Caldolor group than with hospital standard of care.

Pain was also managed better in the Caldolor group compared to standard of care narcotics.

Additionally, in August 2020, Cumberland announced the results of a review of nine clinical studies evaluating Caldolor.

The comprehensive review was published in the journal Clinical Therapeutics and involved 1,062 adult patients, with 757 receiving Caldolor and 305 receiving placebo or a comparator medication.

The data noted that the use of Caldolor improved post-surgery recovery, decreased surgical stress, and reduced the use of opioids and over-the-counter medication.

The study determined that patients given Caldolor experienced less postoperative pain and decreased opioid use.

Study authors also concluded that the rapid administration and preemptive use of Caldolor should be considered in Enhanced Recovery After Surgery protocols for the management of postoperative pain including that of traumatic origin.

Joint Venture Agreement

In August 2020, Cumberland entered into an agreement with WinHealth Investment (Singapore) Ltd creating WHC Biopharmaceuticals, Pte.

The joint venture will focus on acquiring, developing, registering, and commercializing development stage and commercial stage biopharmaceuticals for China, Hong Kong and other Asian markets.

Paycheck Protection Program

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The PPP is administered by the U.S.

Small Business Administration.

Small Business Administration ("SBA").

The loan matures April 14, 2022, and bears interest at a rate of 1.0% per year, payable monthly commencing during November 2020.

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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.

In October 2020, we submitted a request for forgiveness of the PPP loan.

The request was approved by the lender, Pinnacle Bank, who then submitted it to the SBA for the SBA's review and approval.

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 and second quarters of 2020 due to the COVID-19 pandemic.

Enrollment in our clinical studies was interrupted during 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.

We are awaiting further study results before deciding on the best path for approval for ifetroban, our first new chemical entity.

Many of our clinical study sites have reopened and resumed screening of patients for potential enrollment into our studies.

We are awaiting results from the studies underway before deciding on the best development path for the registration of ifetroban, our first new chemical entity.

New Hospital Product Candidate

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A Phase II study has been initiated and patient enrollment completed.

We are now evaluating the results from this study and will then determine the next steps for this product development program.

We have completed the study report, filed it with the FDA and are now determining the next steps for this product development program.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

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RESULTS OF OPERATIONS

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,

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

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

Three months ended September 30,

2020 2019 Change

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

Three months ended June 30,

Three months ended September 30,

2020 2019 Change

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Net revenues.

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.

Net revenues for the three months ended September 30, 2020, were $9.3 million compared to $6.9 million for the three months ended September 30, 2019.

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

Vibativ, Kristalose, Omeclamox-Pak, Caldolor and Vaprisol during the quarter.

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 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.

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

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

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

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.

Vibativ revenue was $2.8 million for the three months ended September 30, 2020, an increase of $1.4 million over the same period last year.

The 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.

Kristalose revenue increased by $0.7 million during the third 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.

Caldolor revenue was $1.4 million for the third quarter of 2020, an increase of $0.2 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.

Vaprisol revenue was $0.4 million for the third quarter of 2020, an increase of $0.2 million.

This increase of net sales compared to the third quarter of 2019 is primarily due to increased sales volumes for the product.

Omeclamox-Pak revenue increased $0.4 million for the third quarter of 2020, compared to the third quarter of 2019, primarily due to an increase in sales volumes and improved net pricing.

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 $0.4 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.

During the quarter, there was a decrease of $0.6 million in the product's revenue when compared to the prior year period as a result of lower sales volumes during the period.

Cost of products sold .

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.

Co st of products sold for the third quarter of 2020 and 2019 were $2.1 million and $1.6 million, respectively.

Cost of products sold, as a percentage of net revenues, were 23.2% during the three months ended September 30, 2020, compared to 22.8% during the three months ended September 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.

The increase in Vibativ costs of product sold in the current period was $0.4 million due to increased product sales.

The Vibativ inventory sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018.

The increase in costs of product sold expense included $0.2 million that was the result of a step up in the fair value of the inventory over the cost to Theravance, as required under purchase accounting rules.

Selling and marketing .

Selling and marketing expense for the 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.

Selling and marketing expense for the third quarter of 2020 decreased $0.2 million compared to the prior year period.

This decrease is primarily attributable to decreases in direct promotional spending, meeting costs and travel expenses.

There were partially offsetting increases in royalty costs associated with growth in Vibativ sales during the current quarter.

Research and development .

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

Research and development costs were $1.2 million for the third 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.

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General and administrative .

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.

General and administrative expense for the third quarter of 2020 increased to $2.4 million from $2.0 million during the third quarter of 2019 as a result of increases in business development, professional, legal and insurance costs.

These increases were partially offset by decreases in non-cash stock based compensation during the period.

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

Financial Impact of Vibativ Three months ended September 30,

Net revenue $ 2,813,249 $ 1,451,595

Cost of products sold (1)

945,066 524,664

Royalty and operating expenses 621,244 160,968

Vibativ contribution $ 1,246,939 $ 765,963

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

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.

Amortization for the three months ended September 30, 2020, and three months ended September 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.

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

As of September 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,

Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019

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

Nine months ended September 30,

2020 2019 Change

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

Six months ended June 30,

Nine months ended September 30,

2020 2019 Change

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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.

Net revenues for the nine months ended September 30, 2020, were $27.2 million compared to $25.1 million for the nine months ended September 30, 2019.

As detailed in the table above, net revenue increased during the first nine months of 2020 for four of our marketed products:

Vibativ, Kristalose, Caldolor and Vaprisol.

This resulted in an overall 8.4% revenue increase partially offset by decreases in our other two products.

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

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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.

The first three installments totaling $2.3 million due from Clinigen was recorded during the nine months ended September 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.

Vibativ revenue was $8.6 million for the nine months ended September 30, 2020, an increase of $2.4 million over the same period last year.

The 38.9% 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.

Kristalose revenue was $10.4 million during the first nine months of 2020, an increase of $0.7 million for the same period last year.

The 7% increase in net revenue was a result of improved sales volume for the product.

Vaprisol revenue was $0.8 million for the first nine months of 2020, which is an increase of net sales of $0.1 million compared to the first nine months of 2019 primarily due to increased sales volumes.

Omeclamox-Pak revenue decreased $0.2 million for the nine months ended September 30, 2020, compared to the nine months ended September 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.

There was a decrease of $1.1 million in the product's year to date revenue for the nine months ended September 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 $3.7 million for the first three quarters of 2020, an increase of $0.1 million compared to the same period last year.

The 4% 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 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.

Co st of products sold for the first nine months of 2020 and 2019 were $6.4 million and $5.0 million, respectively.

Cost of products sold, as a percentage of net revenues, were 23.5% during the nine months ended September 30, 2020, compared to 20.1% during the nine months ended September 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.

The increase in Vibativ costs of product sold in the current period was $1.0 million due to increased product sales.

The Vibativ inventory sold during the period was acquired and paid for by Cumberland as part of the acquisition of the brand during 2018.

The increase in costs of product sold expense included $0.5 million that was the result of a step up in the fair value of the inventory over the cost to Theravance, as required under purchase accounting rules.

Selling and marketing .

Selling and marketing expense for the 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.

Selling and marketing expense for the nine months ended September 30, 2020 and 2019 were both $11.2 million.

Overall, there was a small decrease in selling and marketing expenses, with decreases in direct promotional spending, meeting costs and travel expenses.

These decreases were partially offset by increases in salaries as well as increases in royalty costs associated with growth in Vibativ sales during the period.

Research and development .

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

Research and development costs were $4.4 million for the first nine months of 2020 and $4.8 million for the same period last year.

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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.

General and administrative expense for the nine months ended September 30, 2020, decreased to $6.6 million from $6.8 million during the nine months ended September 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.

A portion of these decreased costs were related to 2019 expenses related to our acquisition of Vibativ.

A portion of these decreased costs were for 2019 expenses related to our acquisition of Vibativ.

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

Financial Impact of Vibativ Nine months ended September 30,

Net revenue $ 8,551,125 $ 6,156,653

Cost of products sold (1)

2,765,810 1,760,759

Royalty and operating expenses 1,325,199 1,033,900

Vibativ contribution $ 4,460,116 $ 3,361,994

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

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

Amortization for the nine months ended September 30, 2020, and nine months ended September 30, 2019, totaled approximately $3.3 million and $3.1 million, respectively.

Income taxes .

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.

Income tax expense (benefit) for the nine months ended September 30, 2020, as a percentage of loss from continuing operations before income taxes, was 0.9%, compared to (1.2)% for the nine months ended September 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES

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Treasury notes and bonds, corporate bonds and commercial paper.

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

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

September 30, 2020 December 31, 2019

Cash and cash equivalents $ 26,646,530 $ 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 six months ended June 30, 2020 and June 30, 2019:

Six months ended June 30,

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

Nine months ended September 30,

Net cash provided by (used in):

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Net decrease in cash and cash equivalents $ (1,566,105) $ (960,536)

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.

The net $1.6 million decrease in cash and cash equivalents for the nine months ended September 30, 2020, was primarily attributable to cash used in investing and financing activities.

Cash provided by operating activities of $4.6 million was positively impacted by decreases in inventory of $1.7 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $4.3 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.

Cash used by investing activities was the result of additions to intangibles of $1.8 million, equipment of $0.1 million and the payment of $1.0 million to Nordic.

Our financing activities included the net repayment of $1.5 million on our revolving line of credit, the $1.6 million in cash used to repurchase shares of our common stock as well as the $0.8 million used for the repurchase of a portion of CET's shares.

The net $1.0 million decrease in cash and cash equivalents for the nine months ended September 30, 2019 was attributable to cash used in financing activities, partially offset by the $2.2 million and the $0.4 million in cash provided by operating and investing activities, respectively.

Cash provided by operating activities of $2.2 million was positively impacted by the decrease in inventory as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $4.4 million.

Cash provided by investing activities was increased by net sales of marketable securities of $6.1 million, partially offset by the $5.0 million payment to Theravance as part of the acquisition of Vibativ and the additions to intangibles of $0.5 million.

Our financing activities reflected the $2.6 million in cash used to repurchase shares of our common stock.

Debt Agreement

On October 7, 2020, we entered into a Fourth Amendment (“Fourth Amendment”) to the Revolving Credit Loan Agreement with Pinnacle Bank (the “Pinnacle Agreement”).

The Fourth Amendment extends the maturity date of the Pinnacle Agreement through October 1, 2022 and provides for a principal available for borrowing of up to $15 million.

We also have the ability to request an increase of up to an additional $5 million, upon the satisfaction of certain conditions and approval by Pinnacle Bank.

If fully expanded, the Fourth Amendment would provide a maximum principal available for borrowing of up to $20 million.

On May 10, 2019, we entered into a third amendment ("Third Amendment") to the Revolving Credit Loan Agreement, dated July 28, 2017, with Pinnacle Bank (“Pinnacle Agreement”).

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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 June 30, 2020.

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

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

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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.

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.

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.

In October 2020, we submitted a request for forgiveness of the PPP loan.

The request was approved by the lender, Pinnacle Bank, who then submitted it to the U.S.

Small Business Administration ("SBA") for the SBA's review and approval.

OFF-BALANCE SHEET ARRANGEMENTS

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

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis