What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-13 · 146 added, 141 removed, 233 unchanged (55% of the section changed)

24 unchanged sentences

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

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

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

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

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We look for strategic partners that can complement our capabilities and enhance opportunities for our brands.

For example, our co-promotion partnership with Poly Pharmaceuticals, Inc.

and Foxland Pharmaceuticals, Inc.

has allowed us to expand support for Kristalose across the United States.

For example, our co-promotion partnerships have allowed us to expand support for Kristalose across the United States.

Building an international market - We have established our own commercial capabilities, including two sales divisions, to cover the U.S.

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COVID-19 Pandemic

In March 2020, the U.S.

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 COVID-19 pandemic, continuing to operate our business – keeping facilities open and our organization intact.

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.

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Our business and our clinical studies were impacted, as fewer patients sought elective surgeries and our access to medical facilities was substantially limited.

Throughout the pandemic, we carefully monitored our supply chain, including the flow of raw materials into the plants that manufacture our products, as well as the batches of finished products emerging from those facilities.

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, such as Vaprisol, that delivered a strong performance during the pandemic.

We have responded to the pandemic with a fast and coordinated approach to ensure the health and safety of our team.

We were also able to continue the delivery of our products, while addressing the interests of our shareholders, employees, partners and community.

In July 2021, we released our second annual Sustainability Report ("ESG Report"), which details Cumberland’s activities pertaining to environmental, social and governance (“ESG”) matters.

After issuing our inaugural ESG report last year, we remain committed to sustainability and to maintaining transparency of our corporate operations.

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.

RediTrex Launch

In late 2019, we received approval from the U.S.

Food and Drug Administration (“FDA”) for our New Drug Application for RediTrex, our methotrexate product line.

RediTrex is a new line of pre-filled syringes specifically designed for ease of handling and dosing accuracy for the subcutaneous administration of methotrexate in patients with arthritis and psoriasis.

In late 2020, we received initial product supplies and then provided shipments of RediTrex to select accounts.

Due to the pandemic, we delayed the national launch of the product, which was implemented during the third quarter of 2021.

RediTrex treats patients with severe, active rheumatoid arthritis, and polyarticular juvenile idiopathic arthritis who have difficulty tolerating or responding to orally delivered methotrexate.

It is also approved for symptomatic control of severe, recalcitrant, disabling psoriasis in adults who are not adequately responsive to other forms of therapy.

With more than 54 million Americans living with some form of arthritis, the disease is among the most common causes of work disability in the U.S., according to the CDC.

The oral form of methotrexate is typically the first line of treatment for rheumatoid arthritis.

As the disease progresses, the dose must be increased to stay effective, often causing intolerable gastrointestinal side effects.

Injectable methotrexate has been proven to be more effective than oral delivery, with fewer gastrointestinal reactions.

Because of the increased efficacy and tolerability, injectable methotrexate can delay the need to move to costly biologics, lowering overall patient treatment costs.

Once disease progression requires the use of biologics, continuing the treatment of injectable methotrexate along with the biologic has been shown to increase overall efficacy.

Other injectable methotrexate options available may not optimally meet the needs of arthritis patients who are offered either a vial and syringe for self-injection, or the use of an expensive autoinjector.

The vial and syringe method can be difficult for a patient to handle due to limited dexterity in their hands.

Additionally, obtaining the exact dose needed while preventing skin exposure to the caustic methotrexate can be quite challenging for many patients.

The autoinjectors provide a better alternative to the vial and syringe, but they remove injection control from the patient and can be painful to administer.

They are also the most expensive methotrexate delivery.

In July 2021, we released our second annual Sustainability Report (the "2020 Sustainability Report"), which details Cumberland’s activities pertaining to our environmental, social and governance (“ESG”) matters.

After issuing our inaugural ESG report last year (the "2019 Sustainability Report"), we remain committed to sustainability and to maintaining transparency of our corporate operations.

As the largest biopharmaceutical company founded and headquartered in the Mid-South, we hold ourselves to the highest standards of ethical practices and understand the importance of recognizing and addressing our impact on our constituents, the community and the environment.

The ESG Report notes that in 2020 we provided nearly 2.5 million patient doses of our products, safely disposed of over 4,000 pounds of expired and damaged products and had no product recalls.

We also had no Company brands that were listed on the FDA’s MedWatch Safety Alerts for Human Medical Products, no Company product issues that were identified by FDA from their Adverse Event Reporting System and no clinical trials that were terminated due to failure to practice good clinical standards.

The ESG Report also highlights several initiatives we implemented as part of our commitment to delivering high-quality pharmaceutical products to improve patient care.

The 2020 Sustainability Report notes that in 2020 we provided nearly 2.5 million patient doses of our products, safely disposed of over 4,000 pounds of expired and damaged products and had no product recalls.

We also had no Company brands listed on the FDA’s MedWatch Safety Alerts for Human Medical Products, no Company product issues identified by FDA from their Adverse Event Reporting System and no clinical trials terminated due to failure to practice good clinical standards.

The 2020 Sustainability Report also highlights several initiatives we implemented as part of our commitment to delivering high-quality pharmaceutical products to improve patient care.

For example, we continued a program to serialize all commercial products sold in the United States, allowing us to track every unit distributed, which helps to prevent counterfeit drugs from entering the market under the Cumberland brand.

In addition, through our coupon program, Cumberland covers up to 90% of patient prescription costs for our gastrointestinal products.

The ESG Report also highlights our investment in our employees through our continuing education programs, employee development initiatives and employee recognition awards.

In addition, through our coupon program, Cumberland can cover up to 90% of patient prescription costs for our gastrointestinal products.

The 2020 Sustainability Report also highlights our investment in our employees through our continuing education programs, employee development initiatives and employee recognition awards.

Cumberland’s workforce is 46% women – and 18% of our employees are minorities.

New Chief Financial Officer Appointment

On May 17, 2021, Cumberland appointed John Hamm as the new Senior Director Finance & Accounting and Chief Financial Officer.

In this role, he will manage all of the Company’s finance and accounting activities while continuing to oversee corporate development and legal matters.

Hamm has more than 25 years of finance and accounting experience, including 20 years in health care.

He previously held the positions of Chief Operating Officer and Chief Financial Officer, Pharmacy at HealthSpring, Inc., a managed care organization now operating as Cigna-HealthSpring.

He was also the Vice President Finance at Emdeon Business Services.

Emdeon Inc., a healthcare technology firm now operates as Change Healthcare Inc., a NASDAQ listed company with over $3 billion in annual revenue.

Hamm holds a Bachelor of Science in Business Administration with a minor in Accounting from Wheeling University.

He earned his Master’s in Business Administration with an emphasis in Accounting from West Virginia University.

He is a Certified Management Accountant (CMA) and Certified Financial Manager (CFM).

Prior to this new appointment, Mr.

Hamm served as Cumberland’s Director Corporate Development.

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.

The PPP is administered by the U.S.

Small Business Administration (“SBA”).

Pursuant to the PPP requirements, loan funds were used to maintain payroll, continue group health care benefits, and pay for rent and utilities during the pandemic.

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

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

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.

Cumberland used the PPP loan funds for such qualifying expenses.

Due to assistance from our PPP loan, the Company did not lay off or furlough any employees as a result of the COVID-19 pandemic.

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.

RediTrex Launch

During late 2018, we completed the submission of and filed with the U.S.

Food and Drug Administration (“FDA”) a New Drug Application for RediTrex, our methotrexate products.

In December 2019, we received FDA approval for RediTrex and began planning for the launch of the product line.

We provided initial shipments of RediTrex to select accounts in November 2020 and we are planning to launch the product line nationally in late September 2021.

Ifetroban Phase II Studies

Ifetroban Clinical Studies

We have been evaluating our ifetroban product candidate in a series of clinical studies.

We are sponsoring Phase II clinical programs to evaluate our ifetroban product candidates in 1) patients with cardiomyopathy associated with Duchenne Muscular Dystrophy, a rare, fatal, genetic neuromuscular disease that results in deterioration of the skeletal, heart and lung muscles, 2) Systemic Sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs and 3) Aspirin-Exacerbated Respiratory Disease, a severe form of asthma.

In addition, we have completed two pilot Phase II studies involving 1) patients suffering from Hepatorenal Syndrome, a life-threatening condition involving liver and kidney failure and 2) patients with Portal Hypertension that is associated with chronic liver disease.

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

Enrollment in our clinical studies was interrupted due to the COVID-19 pandemic.

While enrollment of new patients has been limited, many of our clinical study sites have reopened and resumed screening of patients for potential enrollment into our studies.

Enrollment in these clinical studies was interrupted due to the COVID-19 pandemic.

However, many of our clinical study sites have reopened and resumed screening of patients for potential participation into our studies.

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

Cumberland was responsible for the formulation, development and FDA approval of both Acetadote and Caldolor.

Our Medical Advisory Board has helped us identify additional opportunities that address unmet or poorly met medical needs.

As a result, Cumberland has successfully designed, formulated and completed the preclinical studies for a cholesterol-reducing agent for use in the hospital setting.

We completed a Phase I study which defined the pharmacokinetic properties and provided a favorable safety profile for this new product candidate.

The study results and a proposed clinical development plan were discussed with the FDA.

We also completed a Phase II study to further evaluate administration, dosing and pharmacokinetics of the product.

We are now evaluating the next steps for this product development program.

In September 2021, our Board of Directors approved a new clinical program for the use of ifetroban to treat Progressive Fibrosing Interstitial Lung Diseases (“PF-ILDs”).

Nonclinical studies are complete, and the resulting manuscript has been prepared and submitted for publication.

A Phase II clinical study is planned and an application to the FDA is in preparation to support this new clinical program.

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

Omeclamox-Pak Supply Update

Cumberland has partnered with a select group of FDA-approved facilities to manufacture its line of branded pharmaceutical products and has been carefully monitoring its supply chain during the pandemic.

The packager for our Omeclamox-Pak product encountered financial difficulties, and their operations are currently suspended.

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

We are awaiting the 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.

Generic IV Acetaminophen

Four generic companies have launched acetaminophen for injection products that provide an alternative to our Caldolor product for the treatment of acute surgical pain.

Renal Colic Study

A clinical trial studying the comparison of intravenous ibuprofen with injectable ketorolac in renal colic pain management demonstrated that ibuprofen is the more rapid-acting drug in controlling pain caused by kidney stones.

The study also indicated that the complete relief from pain with ibuprofen was twice as much as that of ketorolac.

The findings build upon a body of medical evidence supporting the use of our Caldolor product for the treatment of patient pain.

Hyponatremia Publication

The Health Outcome Predictive Evaluation (HOPE) COVID-19 Registry Analysis , an international study of over 4,000 patients published in November 2020, found that patients hospitalized with COVID-19 had a high risk of developing hyponatremia.

These COVID-19 patients also had a higher incidence of mortality due to their hyponatremia.

The study results support the use of an intravenous vaptan to treat hyponatremia in critically ill patients afflicted with COVID-19.

Hyponatremia, an imbalance of serum sodium to body water, is the most common electrolyte disorder among hospitalized patients.

Our Vaprisol product is one of two branded prescription products indicated for the treatment of hyponatremia, and the only intravenously administered branded treatment.

Vaprisol has a proven day-1 response rate to normalize serum sodium levels in hyponatremic patients and move them out of the Intensive Care Unit as efficiently as possible.

New Line of Credit

On October 28, 2021, we entered into an amendment to renew our Revolving Credit Loan Agreement with Pinnacle Bank.

The amendment extended the term of the loan agreement for a three-year period ending in October 2024.

The facility provides for a principal balance available for borrowing up to $15 million and an opportunity to request an increase in availability to $20 million.

The interest rate on funds borrowed under the facility ranges from 30-day LIBOR plus 175 to 275 basis points depending on the funded debt ratio.

Vibativ International Agreements

On August 25, 2021, we signed an agreement with Verity Pharmaceuticals International Limited to license and commercialize Vibativ in Puerto Rico.

Verity is a specialty pharmaceutical company with commercial operations in the U.S.

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.

SciClone Pharmaceuticals (Holdings) Limited has licensed our Vibativ product for sale and distribution in China.

In February 2021, SciClone completed an initial public offering and listing of their shares on the Hong Kong stock exchange.

In June 2021, SciClone submitted an application to the Chinese regulatory authority for the approval of Vibativ in that country.

In October 2021, we were informed by SciClone that the filing was accepted by the regulatory agency for review.

SciClone expects a review period of up to twelve months for their application and believes that the potential for Vibativ in China may be significant.

Despite the challenges of operating during a pandemic, Cumberland remains committed to our mission of providing innovative products that improve the quality of care for patients and address poorly met medical needs.

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RESULTS OF OPERATIONS

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended June 30, 2021 and 2020:

Three months ended June 30,

Three months ended September 30, 2021 compared to the three months ended September 30, 2020

The following table presents the unaudited interim statements of operations for continuing operations for the three months ended September 30, 2021 and 2020:

Three months ended September 30,

2021 2020 Change

9 unchanged sentences

Interest income 7,394 12,004 (4,610)

Other income 2,187,140 — 2,187,140

Interest expense (20,021) (75,210) 55,189

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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,

2021 2020 Change

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Net revenues.

Net revenues for the three months ended June 30, 2021, were $9.1 million compared to $9.6 million for the three months ended June 30, 2020.

Net revenues for the three months ended September 30, 2021, were $8.1 million compared to $9.3 million for the three months ended September 30, 2020.

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

Kristalose and Vaprisol during the quarter.

Kristalose revenue increased by 51.7% during the second quarter of 2021 to $5.3 million, when compared to the prior year period.

Kristalose and Acetadote during the quarter.

Kristalose revenue increased by 11.0% during the third quarter of 2021 to $4.0 million, when compared to the prior year period.

The increase was primarily the result of growth in shipments of the product to our wholesale customers.

Vaprisol revenue was $0.4 million for the second quarter of 2021, an increase of $0.2 million.

This increase of net sales compared to the second quarter of 2020 is primarily due to increased utilization in supporting patients impacted by COVID-19 infections.

Caldolor revenue was $0.9 million for the second quarter of 2021, a decrease of $0.2 million compared to the same period last year.

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

During the quarter, there was an increase of $0.2 million in the product's revenue when compared to the prior year period as a result of higher sales volumes for the Authorized Generic.

Vaprisol revenue was $0.3 million for the third quarter of 2021, a decrease of $0.1 million.

This decrease of net sales compared to the third quarter of 2020 is primarily due to cyclical buying trends.

Caldolor revenue was $1.3 million for the third quarter of 2021, a decrease of $0.2 million compared to the same period last year.

The decrease was the result of lower international shipments of the product, due to order timing.

Vibativ revenue was $1.8 million for the three months ended June 30, 2021, compared to $3.3 million the same period last year.

The decrease was a result of decreased domestic and international sales volumes during the period due to order timing.

Omeclamox-Pak had no sales for the second quarter of 2021, as Cumberland is currently out of commercial inventory of this product.

Vibativ revenue was $1.9 million for the three months ended September 30, 2021, compared to $2.8 million the same period last year.

The decrease was a result of customer buying patterns during the year.

Omeclamox-Pak had no sales for the third quarter of 2021, as Cumberland is currently out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties, and currently is under new management and a reorganization.

We are in discussions about the resumption of packaging the product.

Net revenue for the second quarter of 2021 was negatively impacted by product returns during the period.

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 during the period, impacted by generic competition.

Net revenue for the third quarter of 2021 was positively impacted by various revenue adjustments.

Cost of products sold .

Co st of products sold for the second quarter of 2021 and 2020 were $1.7 million and $2.6 million, respectively.

Cost of products sold, as a percentage of net revenues, were 19.2% during the three months ended June 30, 2021, compared to 27.2% during the three months ended June 30, 2020.

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

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

Co st of products sold for the third quarter of 2021 and 2020 were $1.3 million and $2.1 million, respectively.

Cost of products sold, as a percentage of net revenues, were 16.5% during the three months ended September 30, 2021, compared to 23.2% during the three months ended September 30, 2020.

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 of Kristalose product sales.

Selling and marketing .

Selling and marketing expense for the second quarter of 2021 increased $0.3 million compared to the prior year period.

This increase is primarily attributable to an increase in marketing spending for RediTrex and Vibativ.

Lower royalty costs were partially offset by an increase in direct promotional spending, meeting costs and travel expenses during the second quarter of 2021.

Selling and marketing expense for the third quarter of 2021 increased $0.2 million compared to the prior year period.

This increase is primarily attributable to an increase in marketing spending for Kristalose and Vibativ.

Lower royalty costs were partially offset by an increase in direct promotional spending, meeting costs and travel expenses during the third quarter of 2021.

Research and development .

Research and development costs were $1.4 million for the second quarter of 2021 and approximately the same as for the same period last year.

Research and development costs for the third quarter of 2021 and 2020 were $1.5 million and $1.2 million, respectively.

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.

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General and administrative .

General and administrative expense for the second quarter of 2021 were $2.1 million, consistent with the second quarter of 2020.

There were increases in professional, legal and insurance costs which were offset by decreases in non-cash stock based compensation during the second quarter of 2021.

General and administrative expense for the third quarter of 2021 were $2.0 million, which were $0.3 million lower than the third quarter of 2020.

There were declines in salaries and stock-based compensation expense.

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

Financial Impact of Vibativ Three months ended June 30,

Financial Impact of Vibativ Three months ended September 30,

Net revenue $ 1,896,584 $ 2,813,249

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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 June 30, 2021, and three months ended June 30, 2020, totaled approximately $1.2 million and $1.1 million, respectively.

Amortization for the three months ended September 30, 2021, and three months ended September 30, 2020, totaled approximately $1.0 million and $1.1 million, respectively.

Income taxes .

Income tax expense for the three months ended June 30, 2021, was comparable to the income tax expense for the three months ended June 30, 2020.

As of June 30, 2021, 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, 2021, was comparable to the income tax expense for the three months ended September 30, 2020.

As of September 30, 2021, 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 2021 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, 2021 compared to the six months ended June 30, 2020

The following table presents the unaudited interim statements of operations for continuing operations for the six months ended June 30, 2021 and 2020:

Six months ended June 30,

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

The following table presents the unaudited interim statements of operations for continuing operations for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30,

2021 2020 Change

15 unchanged sentences

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

Six months ended June 30,

Nine months ended September 30,

2021 2020 Change

9 unchanged sentences

Net revenues.

Net revenues for the six months ended June 30, 2021, were $19.6 million compared to $17.9 million for the six months ended June 30, 2020.

Net revenues for the nine months ended September 30, 2021, were $27.7 million compared to $27.2 million for the nine months ended September 30, 2020.

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

Kristalose, Vibativ, Caldolor and Vaprisol during the first six months of 2021 resulting in an overall 9.3% revenue increase.

Kristalose revenue was $8.3 million during the first six months of 2021, an increase of $1.5 million when compared with the prior year period.

Kristalose, Vibativ, Caldolor and Vaprisol during the first nine months of 2021 resulting in an overall 1.8% revenue increase.

Kristalose revenue was $12.3 million during the first nine months of 2021, an increase of $1.9 million when compared with the prior year period.

Revenue increased due to continued strong sales volume from our Foxland distributor and other wholesalers.

Vibativ revenue was $6.9 million for the six months ended June 30, 2021, an increase of $1.2 million over the same period last year.

The 20.5% increase in net revenue was a result of improved sales volume for the product during the first quarter 2021.

Vaprisol revenue was $1.5 million for the first six months of 2021, which is an increase of net sales of $1.2 million compared to the first six months of 2020 primarily due to increased sales volumes which is the result of increased utilization in supporting patients impacted by COVID-19 infections.

Omeclamox-Pak had no sales for the six months ended June 30, 2021, as Cumberland is currently out of commercial inventory of this product.

Vibativ revenue was $8.8 million for the nine months ended September 30, 2021, an increase of $0.2 million over the same period last year.

The 2.9% increase in net revenue was a result of improved sales volume for the product during the first quarter of 2021.

Vaprisol revenue was $1.9 million for the first nine months of 2021, which is an increase of net sales of $1.1 million compared to the first nine months of 2020 primarily due to increased sales volumes which is the result of increased utilization in supporting patients impacted by COVID-19 infections.

Omeclamox-Pak had no sales for the nine months ended September 30, 2021, as Cumberland is currently out of commercial inventory of this product.

The packager for our Omeclamox-Pak product encountered financial difficulties and currently is under new management and a reorganization.

We are in discussions about the resumption of packaging the product.

Net revenue for the first two quarters of 2021 was negatively impacted by product returns during the period.

Net revenue for the first three quarters of 2021 was negatively impacted by product returns during the period.

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

There was a decrease of $1.0 million in the product's year to date revenue for the six months ended June 30, 2021, when compared to the prior year period as a result of lower sales volumes for our Authorized Generic.

Caldolor revenue was $2.5 million for the first two quarters of 2021, an increase of $0.2 million compared to the same period last year.

Domestic shipments of the product increased in the second quarter of 2021.

There was a decrease of $0.9 million in the product's year to date revenue for the nine months ended September 30, 2021, when compared to the prior year period as a result of lower sales volumes for our Authorized Generic.

Caldolor revenue was $3.7 million for the first three quarters of 2021, an increase of $0.1 million compared to the same period last year.

Domestic shipments of the RTU bag product increased in the third quarter of 2021.

Cost of products sold .

Co st of products sold for the first six months of 2021 and 2020 were both $4.2 million remaining consistent.

Co st of products sold for first nine months of 2021 and 2020 were $5.5 million and $6.4 million, respectively.

In 2021, we have realized savings for the Authorized Generic of $0.4 million, Omeclamox-Pak of $0.2 million and Vibativ of $0.3 million.

Selling and marketing .

Selling and marketing expense for the six months ended June 30, 2021, increased $0.3 million compared to the prior year period.

This increase is primarily attributable to increases in royalty costs as well as an increase in salaries and dispensing fees.

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

Selling and marketing expense for the nine months ended September 30, 2021, increased $0.5 million compared to the prior year period.

This increase is primarily attributable to increases in royalty costs as well as an increase in direct sales promotion costs and dispensing fees.

Research and development .

Research and development costs were $2.6 million for the first six months of 2021 compared to $3.1 million for the same period last year.

Research and development costs were $4.1 million for the first nine months of 2021 compared to $4.4 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 six months ended June 30, 2021, remained consistent with $4.3 million from $4.2 million during the six months ended June 30, 2020.

Although we experienced increases in advisory, legal and professional fees, we also had a reduction in non-cash stock based compensation and other benefits during the period.

General and administrative expense for the nine months ended September 30, 2021, remained consistent with $6.4 million from $6.6 million during the nine months ended September 30, 2020.

In 2021, we experienced lower salary and non cash stock based compensation expense.

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

Financial Impact of Vibativ Six months ended June 30,

Financial Impact of Vibativ Nine months ended September 30,

Net revenue $ 8,799,891 $ 8,551,126

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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 six months ended June 30, 2021, and six months ended June 30, 2020, totaled approximately $2.3 million and $2.2 million, respectively.

Amortization for the nine months ended September 30, 2021, and nine months ended September 30, 2020, totaled approximately $3.4 million and $3.3 million, respectively.

Income taxes .

Income tax expense (benefit) for the six months ended June 30, 2021, as a percentage of income (loss) from continuing operations before income taxes, was (3.8)% compared to (1.2)% for the six months ended June 30, 2020.

Income tax expense (benefit) for the nine months ended September 30, 2021, as a percentage of income (loss) from continuing operations before income taxes, was 1.9% compared to 0.9% for the nine months ended September 30, 2020.

LIQUIDITY AND CAPITAL RESOURCES

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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.

The following table summarizes our liquidity and working capital as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table summarizes our liquidity and working capital as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 25,843,231 $ 24,753,796

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Revolving line of credit availability $ — $ —

The following table summarizes our net changes in cash and cash equivalents for the six months ended June 30, 2021 and June 30, 2020:

Six months ended June 30,

The following table summarizes our net changes in cash and cash equivalents for the nine months ended September 30, 2021 and September 30, 2020:

Nine months ended September 30,

Net cash provided by (used in):

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Net increase (decrease) in cash and cash equivalents $ 1,089,435 $ (1,566,105)

The net $0.9 million increase in cash and cash equivalents for the six months ended June 30, 2021, was primarily attributable to cash provided by operating activities, partially offset by cash used in investing and financing activities.

The net $1.1 million increase in cash and cash equivalents for the nine months ended September 30, 2021, was primarily attributable to cash provided by operating activities, partially offset by cash used in investing and financing activities.

Cash provided by operating activities of $4.4 million was positively impacted by decreases in inventory of $2.6 million and accounts receivable of $2.5 million, as well as the add back of non-cash expenses of depreciation, amortization and share-based compensation expense totaling $4.0 million.

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Our financing activities included the $1.0 million in cash used to repurchase shares of our common stock as well as the $1.8 million used for the payment of royalties to Theravance for sales of Vibativ.

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 in 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.

Cash used by investing activities was the result of additions to intangibles of $1.8 million, including the payment of $1.0 million for RediTrex, equipment of $0.1 million and partially offset by proceeds from surrender of life insurance policies of $0.4 million.

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.

Debt Agreement

On October 7, 2020, we entered into a Fourth Amendment (“Fourth Amendment”) to the Revolving Credit Loan Agreement, dated July 28, 2017, 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 Pinnacle Agreement.

The Third Amendment extended the term of the Pinnacle Agreement through July 31, 2021, as well as modified certain definitions and terms of the existing financial covenants.

For a summary of the material terms of the Pinnacle Agreement, as amended, see Note 6 to the accompanying unaudited condensed consolidated financial statements.

Under the Pinnacle Agreement, we were initially subject to one financial covenant, the maintenance of a Funded Debt Ratio.

On August 14, 2018, we amended the Pinnacle Agreement ("First Amendment") to replace the single financial covenant with the maintenance of either the Funded Debt Ratio or a Tangible Capital Ratio, as defined in the First Amendment.

The Third Amendment modified the definition of the Funded Debt Ratio and the compliance target of the Tangible Capital Ratio.

Both Third Amendment modifications were related to the Vibativ transaction.

We were in compliance with the Tangible Capital Ratio financial covenant as of June 30, 2021.

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

On October 28, 2021, the Company and Pinnacle Bank entered into a Fourth Amendment to the Revolving Credit Note and Fifth Amendment ("Fifth Amendment") to the Revolving Credit Loan Agreement to renew the Revolving Credit Loan.

The original Pinnacle Agreement was dated July 2017.

Beginning on August 14, 2018, and continuing until October 7, 2020, the Company and Pinnacle Bank entered into a series of amendments to extend and update the Revolving Credit Note and Revolving Credit Agreement.

The most recent amendment dated October 28, 2021, extends the maturity date three years through October 1, 2024.

Consistent with prior Amendments, the Fifth Amendment provides for a principal balance available for borrowing of up to $15 million.

The Company has the right to request an increase of up to an additional $5 million providing a maximum principal available of up to $20 million upon the satisfaction of certain conditions and with the approval of Pinnacle Bank.

Also consistent with prior Amendments, the Company is required to maintain either a Funded Debt Ratio covenant or a Tangible Capital Ratio covenant.

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%.

The applicable interest rate under the Pinnacle Agreement was 3.65% at September 30, 2021.

In addition, a fee of 0.25% per year is charged on the unused line of credit.

Interest and the unused line fee are payable quarterly.

As of September 30, 2021 and December 31, 2020, the Company had $15.0 million in borrowings outstanding under its revolving credit facility.

The Company was in compliance with the Tangible Capital Ratio financial covenant as of September 30, 2021.

Paycheck Protection Program Loan

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OFF-BALANCE SHEET ARRANGEMENTS

During the six months ended June 30, 2021 and 2020, we did not engage in any off-balance sheet arrangements.

During the nine months ended September 30, 2021 and 2020, 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