MANNKIND CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements in this report that are not strictly historical in nature are “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, though not all forward-looking statements contain these identifying words. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in Part II, Item 1A Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. The preceding interim condensed consolidated financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and related notes for the year ended December 31, 2020 and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report. Readers are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made. OVERVIEW We are a biopharmaceutical company focused on the development and commercialization of inhaled therapeutic products for endocrine and orphan lung diseases. Our lead product is Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, which was approved by the FDA in June 2014. Since September 2018, we have been collaborating with United Therapeutics to develop an inhaled formulation of treprostinil known as Tyvaso DPI. In April 2021, United Therapeutics submitted an NDA for Tyvaso DPI to the FDA. United Therapeutics has applied a priority review voucher to the NDA. The FDA has accepted the application for review and is expected to complete their review in October 2021. Our business is subject to significant risks, including but not limited to our ability to commercialize Afrezza successfully, our ability to manufacture sufficient quantities of Afrezza and Tyvaso DPI and our potential need to raise additional capital to fund our operations. Other significant risks also include the risks inherent in drug development, clinical trials and the regulatory approval process for our product candidates, which in some cases depends upon the efforts of our partners. We continue to manage the risk to our business posed by the global COVID-19 pandemic. Our sales representatives have resumed in-person sales calls to the extent permitted by state and local public health authorities and by the policies of individual healthcare providers on their call lists. Our offices in California and Connecticut have remained open for essential personnel and, as public health orders allow, have reopened to non-essential personnel. Although our productivity has been impacted by the global pandemic, we have suitably adapted to the changed business environment that now exists. The impact of the COVID-19 pandemic continues to be uncertain. We do not yet know the full extent of potential delays or impacts on our business, our collaboration arrangements, commercialization efforts, healthcare systems or to the global economy as a whole. The COVID-19 pandemic has the potential to have additional adverse impacts on our operations. We will continue to monitor the COVID-19 situation closely. As of June 30, 2021, we had an accumulated deficit of $3.1 billion and a stockholders’ deficit of $183.6 million. We had net loss of $35.5 million and $48.4 million for the three and six months ended June 30, 2021, respectively. To date, we have funded our operations through the sale of convertible debt securities and equity, from the receipt of upfront and milestone payments from certain collaborations, from borrowings under certain loan arrangements and from sales of Afrezza. CRITICAL ACCOUNTING POLICIES Our critical accounting policies can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2020. See Note 1 – Description of Business and Significant Accounting Policies in the condensed consolidated financial statements included in Part I – Financial Statements (Unaudited) for descriptions of the new accounting policies and impact of adoption. 31 RESULTS OF OPERATIONS Three and six months ended June 30, 2021 and 2020 Revenues The following tables provide a comparison of the revenue categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands): Three Months Ended June 30, 2021 2020 $ Change % Change Net revenue — commercial product sales: Gross revenue from commercial product sales $ 16,575 $ 11,900 $ 4,675 39 % Wholesaler distribution fees, rebates and chargebacks, product returns and other discounts (6,599 ) (4,915 ) $ 1,684 34 % Net revenue — commercial product sales 9,976 6,985 $ 2,991 43 % Revenue — collaborations and services 13,304 8,129 $ 5,175 64 % Total revenues $ 23,280 $ 15,114 $ 8,166 54 % Six Months Ended June 30, 2021 2020 $ Change % Change Net revenue — commercial product sales: Gross revenue from commercial product sales $ 30,185 $ 25,832 $ 4,353 17 % Wholesaler distribution fees, rebates and chargebacks, product returns and other discounts (12,110 ) (10,847 ) $ 1,263 12 % Net revenue — commercial product sales 18,075 14,985 $ 3,090 21 % Revenue — collaborations and services 22,641 16,364 $ 6,277 38 % Total revenues $ 40,716 $ 31,349 $ 9,367 30 % Gross revenue from sales of Afrezza increased by $4.7 million, or 39%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase reflects higher prescription demand, the negative effects of the COVID-19 pandemic on Afrezza sales volumes during the second quarter of 2020 when our sales force had limited access to physicians as a result of the stay-at-home orders implemented around the country, a more favorable mix of Afrezza cartridges, and price. The gross-to-net adjustment was 39.8% of gross revenue, or $6.6 million, for the three months ended June 30, 2021, compared to 41.3% of gross revenue, or $4.9 million, for the same period in the prior year. The decrease in the gross-to-net percentage was primarily driven by a decrease in accounting estimates for wholesaler distribution fees, prompt pay discounts and government rebates as a result of the termination of our free goods program on December 31, 2020, partially offset by an increase in co-pay discounts. As a result, net revenue from sales of Afrezza increased by $3.0 million, or 43%, for the three months ended June 30, 2021 compared to the prior year period. Net revenue from collaborations and services increased by $5.2 million, or 64%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase in collaborations and services revenue was primarily attributed to our collaboration with UT. See Note 7 – Collaboration, Licensing and Other Arrangements . Gross revenue from sales of Afrezza increased by $4.4 million, or 17%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase reflects higher product demand in the first half of 2021 as a result of increased promotional activity in addition to the negative impact that the COVID-19 pandemic had on the demand of Afrezza prescriptions in 2020. The gross-to-net adjustment was 40.1% of gross revenue, or $12.1 million, for the six months ended June 30, 2021, compared to 42.0% of gross revenue, or $10.8 million, for the same period in the prior year. The decrease in the gross-to-net percentage was primarily driven by a decrease in accounting estimates for wholesaler distribution fees and government rebates as a result of the termination of our free goods program on December 31, 2020, partially offset by an increase in co-pay discounts. As a result, net revenue from sales of Afrezza increased by $3.1 million, or 21%, for the six months ended June 30, 2021 compared to the prior year period. Net revenue from collaborations and services increased by $6.3 million, or 38%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase in collaborations and services revenue was primarily attributed to our collaboration with UT. See Note 7 – Collaboration, Licensing and Other Arrangements . 32 Commercial product gross profit The following tables provide a comparison of the commercial product gross profit categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands): Three Months Ended June 30, 2021 2020 $ Change % Change Commercial product gross profit: Net revenue — commercial product sales $ 9,976 $ 6,985 $ 2,991 43 % Less: cost of goods sold 4,411 3,677 $ 734 20 % Commercial product gross profit $ 5,565 $ 3,308 $ 2,257 68 % Gross margin 56 % 47 % Non-GAAP gross margin (1) 76 % 47 % Six Months Ended June 30, 2021 2020 $ Change % Change Commercial product gross profit: Net revenue — commercial product sales $ 18,075 $ 14,985 $ 3,090 21 % Less: cost of goods sold 8,726 7,841 $ 885 11 % Commercial product gross profit $ 9,349 $ 7,144 $ 2,205 31 % Gross margin 52 % 48 % Non-GAAP gross margin (1) 63 % 48 % ____________________ (1) See the reconciliation of gross margin to non-GAAP gross margin under Non-GAAP Measures below. Commercial product gross profit for the three months ended June 30, 2021 increased by $2.3 million, or 68%, compared to the same period in the prior year. Gross margin for the three months ended June 30, 2021 was 56% compared to 47% for the same period in the prior year. The increase in gross profit and gross margin was attributable to an increase in Afrezza sales partially offset by an increase in cost of goods sold. Cost of goods sold in creased by $0.7 million, or 20%, for the three months ended June 30, 2021 compared to the same period in the prior year, primarily due to a $2.0 million fee for the amendment of the Insulin Supply Agreement, partially offset by $1.1 million of increased manufacturing activities, which resulted in a higher amount of costs capitalized to inventory. On a non-GAAP basis, which excludes the $2.0 million insulin supply amendment fee, gross margin was 76% for the second quarter of 2021 compared to 47% for the same period in 2020. See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below. Commercial product gross profit for the six months ended June 30, 2021 increased by $2.2 million, or 31%, compared to the same period in the prior year. Gross margin for the six months ended June 30, 2021 was 52% compared to 48% for the same period in the prior year. The increase in gross profit and gross margin was attributable to an increase in Afrezza sales, partially offset by an increase in cost of goods sold. Cost of goods sold in creased by $0.9 million, or 11%, for the six months ended June 30, 2021 compared to the same period in the prior year, primarily due to a $2.0 million fee for the amendment of the Insulin Supply Agreement, partially offset by $0.8 million of costs associated with lower cost per unit and the termination of the free goods program in December 31, 2020, in addition to $0.5 million of inventory write-offs in 2020. On a non-GAAP basis, which excludes the $2.0 million insulin supply amendment fee, gross margin was 63% for the six months ended June 30, 2021 compared to 48% for the same period in 2020. See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below. 33 Expenses The following tables provide a comparison of the expense categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands): Three Months Ended June 30, 2021 2020 $ Change % Change Expenses: Cost of goods sold $ 4,411 $ 3,677 $ 734 20 % Cost of revenue — collaborations and services 5,515 1,983 $ 3,532 178 % Research and development 2,329 1,464 $ 865 59 % Selling 11,534 7,271 $ 4,263 59 % General and administrative 8,522 6,399 $ 2,123 33 % Asset impairment — 368 $ (368 ) * Loss on foreign currency translation 903 1,867 $ (964 ) (52 %) Loss on purchase commitments 339 — $ 339 * Total expenses $ 33,553 $ 23,029 $ 10,524 46 % ____________________ * Not meaningful Six Months Ended June 30, 2021 2020 $ Change % Change Expenses: Cost of goods sold $ 8,726 $ 7,841 $ 885 11 % Cost of revenue — collaborations and services 8,810 5,345 $ 3,465 65 % Research and development 4,771 3,219 $ 1,552 48 % Selling 21,153 15,417 $ 5,736 37 % General and administrative 16,316 12,603 $ 3,713 29 % Asset impairment — 1,889 $ (1,889 ) * (Gain) loss on foreign currency translation (2,935 ) 71 $ (3,006 ) * Loss on purchase commitments 339 — $ 339 * Total expenses $ 57,180 $ 46,385 $ 10,795 23 % ____________________ * Not meaningful Cost of revenue — collaborations and services increased by $3.5 million, or 178%, for the three months ended June 30, 2021 and $3.5 million, or 65%, for the six months ended June 30, 2021 compared to the respective periods in the prior year. The increases were attributable to an increase in costs for the UT License agreement and pre-commercial activities and the allocation of selling expenses related to the Vertice Pharma Co-Promotion Agreement. 34 Research and development expenses increased by $ 0.9 million, or 5 9 %, for the three months ended June 30 , 2021 and $ 1.6 million, or 48 %, for the six months ended June 30, 2021 compared to the respective period s in the prior year. The in crease s w ere attributable to personnel costs primarily related to increased headcount for research and development, regulatory and medical affairs in addition to costs incurred for clinical studies and pipeline research. Selling expenses increased by $4.3 million, or 59%, for the three months ended June 30, 2021 compared to the same period in the prior year as we expanded our investment behind Afrezza and lowered expenses in the prior year period when we voluntarily reduced compensation and field force activities in response to the onset of the COVID-19 pandemic. As we continued to re-engage our selling activities behind Afrezza, we increased promotional and marketing expenses by $1.8 million and patient support services by $0.6 million during the three months ended June 30, 2021. Personnel expenses increased $3.1 million due to the favorable impact of lower spending during the COVID-19 pandemic as well as increased headcount and stock compensation to support Afrezza growth. The increases in selling expenses were partially offset by a reduction related to the co-promotional cost for Thyquidity which was recognized as cost of revenue — collaboration and services. Selling expenses increased by $5.7 million, or 37%, for the six months ended June 30, 2021 compared to the same period in the prior year as we expanded our investment behind Afrezza and lowered expenses in the prior year period when we voluntarily reduced compensation and field force activities in response to the onset of the COVID-19 pandemic. As we continued to re-engage our selling activities behind Afrezza, we increased promotional and marketing expenses by $2.4 million and patient support services by $0.9 million during the six months ended June 30, 2021. Personnel expenses increased $3.8 million due to the favorable impact of lower spending during the COVID-19 pandemic as well as increased headcount and stock compensation to support Afrezza growth. The increases in selling expenses were partially offset by a reduction related to the co-promotional cost for Thyquidity which was recognized as cost of revenue — collaboration and services. General and administrative expenses increased by $2.1 million, or 33%, for the three months ended June 30, 2021 compared to the same period in the prior year . This increase was primarily attributable to personnel-related costs, including higher stock-based compensation and bonus, as well as lower salaries in the prior year period related to the onset of the COVID-19 pandemic. Additional increases in general and administrative expenses consisted of UT pre-commercial preparations and professional fees . General and administrative expenses increased by $3 .7 million, or 29%, for the six months ended June 30, 2021 compared to the same period in the prior year . This increase was primarily attributable to personnel-related costs, including higher stock-based compensation and bonus, as well as lower salaries in the prior year period related to the onset of the COVID-19 pandemic. Additional increases in general and administrative expenses consisted of UT pre-commercial preparations, professional fees and business development expenses . An impairment of $0.4 million and $1.9 million was recognized for the three and six months ended June 30, 2020 for a commitment asset related to the future funding commitments of the MidCap credit facility. There were no asset impairments for the three and six months ended June 30, 2021. Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros. We are required to record the foreign currency translation impact of the U.S. dollar to Euro exchange rate associated with the recognized gain or loss on purchase commitments. The foreign currency translation loss decreased $1.0 million for the three months ended June 30, 2021 compared to the same period in the prior year. The foreign currency translation gain was $2.9 million for the six months ended June 30, 2021 compared to a $0.1 million loss for the same period in the prior year. 35 Other Income (Expense) The following tables provide a comparison of the other income (expense) categories for the three and six months ended June 30, 2021 and 2020 (dollars in thousands): Three Months Ended June 30, 2021 2020 $ Change % Change Interest income $ 25 $ 14 $ 11 79 % Interest expense on notes (2,812 ) (1,084 ) $ 1,728 159 % Interest expense on Mann Group promissory notes (368 ) (1,281 ) $ (913 ) (71 %) Loss on extinguishment of debt (22,130 ) — $ 22,130 * Other income 35 14 $ 21 150 % Total other expense $ (25,250 ) $ (2,337 ) $ 22,913 980 % Six Months Ended June 30, 2021 2020 $ Change % Change Interest income $ 28 $ 147 $ (119 ) (81 %) Interest expense on notes (8,234 ) (2,155 ) $ 6,079 282 % Interest expense on Mann Group promissory notes (1,398 ) (2,540 ) $ (1,142 ) (45 %) Loss on extinguishment of debt (22,130 ) — $ 22,130 * Other (expense) income (241 ) 10 $ 251 * Total other expense $ (31,975 ) $ (4,538 ) $ 27,437 605 % ____________________ * Not meaningful Interest expense increased by $1.7 million, or 159%, for the three months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily due to the interest expense from the Senior convertible notes. Interest expense increased by $6.1 million, or 282%, for the six months ended June 30, 2021 compared to the same period in the prior year. The increase was primarily due to a $3.7 million milestone obligation that was achieved during the first quarter of 2021 and interest expense on the Senior convertible notes issued in the first quarter of 2021. Interest expense on Mann Group promissory notes decreased by $0.9 million, or 71%, for the three months ended June 30, 2021 and $1.1 million, or 45%, for the six months ended June 30, 2021 compared to the same periods in the prior year. The decrease was primarily due to the repayment of $35.1 million of outstanding principal under the Mann Group non-convertible note and the reduction of the interest rate from 7.00% to 2.50% pursuant to the first amendment. See Note 6 — Borrowings . Loss on extinguishment of debt for the three and six months ended June 30, 2021 was $22.1 million as a result of the amendment to the Mann Group convertible note. See Note 6 — Borrowings . Other income or expense consists primarily of the gain or loss associated with a foreign currency hedging transaction for the three and six months ended June 30, 2021 which is entered into to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement. There was no hedging transaction for the same periods in the prior year. Net Loss and Earnings Per Share (“EPS”) The net loss for the three months ended June 30, 2021 was $35.5 million, or $0.14 per share, compared to a $10.3 million net loss in the prior year period, or $0.05 per share. The increased net loss of $25.3 million was primarily due to a non-cash loss on extinguishment of the Mann Group convertible note of $22.1 million as well as an increase in SG&A expenses and cost of revenue from collaboration and services, partially offset by an increase in Afrezza net revenues and revenues from collaboration and services. The net loss for the six months ended June 30, 2021 was $48.4 million, or $0.20 per share, compared to a $19.6 million net loss in the six months ended June 30, 2020, or $0.09 per share. The increased net loss of $28.9 million was primarily due to the non-cash loss on extinguishment of the Mann Group convertible note of $22.1 million as well as an increase in SG&A expenses, cost of revenue from collaboration and services, and loss on purchase commitments, partially offset by an increase in Afrezza net revenues and revenues from collaboration and services. Non-GAAP net loss, adjusted to exclude the $22.1 million non-cash loss on extinguishment of the Mann Group convertible note was $13.4 million, or $0.05 per share, for the three months ended June 30, 2021 compared to $10.3 million, or $0.05 per share, for the prior 36 year period and $26.3 million, or $0.11 per share, for the six months ended June 30, 2021 compared to $19.6 million, or $0.09 per share, for the same period in the prior year. See the reconciliation to non-GAAP net loss and EPS under Non-GAAP Measures below. Non-GAAP Measures To supplement our unaudited condensed consolidated financial statements presented under GAAP, we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating the Company’s financial performance. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results, including underlying trends. The following tables reconcile our financial measure for net loss and EPS as reported in our condensed consolidated statement of operations to a non-GAAP presentation as adjusted for the $22.1 million non-cash loss on extinguishment of the Mann Group convertible note, which did not result in a change in our financial position. Three Months Ended June 30, (In thousands, except per share data) 2021 2020 $ Change % Change GAAP to Non-GAAP Net Loss and EPS Net loss $ (35,523 ) $ (10,252 ) $ 25,271 246 % Net loss per share - basic and diluted $ (0.14 ) $ (0.05 ) $ 0.09 180 % Less non-cash loss on extinguishment of debt (1) 22,130 — $ 22,130 * Non-GAAP net loss $ (13,393 ) $ (10,252 ) $ 3,141 31 % Non-GAAP net loss per share - basic and diluted $ (0.05 ) $ (0.05 ) $ — — % Shares used to compute non-GAAP basic and diluted net loss per share 249,295 213,880 35,415 17 % Six Months Ended June 30, 2021 2020 $ Change % Change GAAP to Non-GAAP Net Loss and EPS Net loss $ (48,439 ) $ (19,574 ) $ 28,865 147 % Net loss per share - basic and diluted $ (0.20 ) $ (0.09 ) $ 0.11 122 % Less non-cash loss on extinguishment of debt (1) 22,130 — $ 22,130 * Non-GAAP net loss $ (26,309 ) $ (19,574 ) $ 6,735 34 % Non-GAAP net loss per share - basic and diluted $ (0.11 ) $ (0.09 ) $ 0.02 22 % Shares used to compute non-GAAP basic and diluted net loss per share 247,970 212,943 35,027 (16 %) ____________________ * Not meaningful (1) There is no provision for income taxes associated with the non-cash loss on extinguishment of debt as a result of our full valuation allowance. The following tables reconcile our gross margin financial measure as reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations to a non-GAAP presentation as adjusted for the nonrecurring amendment fee related to an amendment to our Insulin Supply Agreement. Three Months Ended June 30, (In thousands) 2021 2020 $ Change % Change Net revenue — Afrezza $ 9,976 $ 6,985 $ 2,991 43 % Less cost of goods sold (4,411 ) (3,677 ) $ (734 ) 20 % GAAP gross profit — Afrezza 5,565 3,308 $ 2,257 68 % Exclude Amphastar amendment fee 2,000 — $ 2,000 * Non-GAAP gross profit — Afrezza $ 7,565 $ 3,308 $ 4,257 129 % Non-GAAP gross margin 76 % 47 % 37 Six Months Ended June 30, 2021 2020 $ Change % Change Net revenue — Afrezza $ 18,075 $ 14,985 $ 3,090 21 % Less cost of goods sold (8,726 ) (7,841 ) $ 885 11 % GAAP gross profit — Afrezza 9,349 7,144 $ 2,205 31 % Exclude Amphastar amendment fee 2,000 — $ 2,000 * Non-GAAP gross profit — Afrezza $ 11,349 $ 7,144 $ 4,205 59 % Non-GAAP gross margin 63 % 48 % ____________________ * Not meaningful LIQUIDITY AND CAPITAL RESOURCES To date, we have funded our operations through the sale of equity and convertible debt securities, from the receipt of upfront and milestone payments from certain collaborations, from borrowings under certain loan arrangements and from sales of Afrezza. As of June 30, 2021, we had $293.3 million principal amount of outstanding debt, consisting of: • $230.0 million aggregate principal amount of Senior convertible notes bearing interest at 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021 and will mature on March 1, 2026, unless earlier converted, redeemed or repurchased. The Senior convertible notes are convertible at an initial conversion price of approximately $5.21 per share of Common Stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. • $40.0 million principal amount under the MidCap credit facility, bearing interest at an annual rate equal to one-month LIBOR plus 6.25%, subject to a one-month LIBOR floor of 1.00%, payable in equal monthly installments beginning in September 2023 through maturity in August 2025. • $18.4 million principal amount of indebtedness under the Mann Group convertible note bearing interest at a fixed rate of 2.50% per annum compounded quarterly and maturing in December 2025, which is convertible into shares of our common stock at the option of Mann Group at a conversion price of $2.50 per share. Interest is paid-in-kind from August 2019 until the end of 2020, after which we have the option to either pay interest in-kind in cash or in shares. • $4.9 million principal amount under a PPP loan, all of which was forgiven by the SBA subsequent to June 30, 2021. In February 2021, we elected to convert the $5.0 million principal amount of 2024 convertible notes into 1,666,667 shares of our common stock in accordance with the terms of the 2024 convertible notes. There can be no assurance that we will have sufficient resources to make any required repayments of principal under the Senior convertible notes, the MidCap credit facility or the Mann Group convertible note. The Senior convertible notes and Mann Group convertible note are fully convertible prior to maturity as further disclosed in Note 6 – Borrowings . To date, we have been able to timely make our required interest payments, but we cannot guarantee that we will be able to do so in the future. If we fail to repurchase the Mann Group promissory notes, we will be in default under the applicable instrument for such indebtedness, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time. Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the noteholders initiating bankruptcy proceedings or causing us to cease operations altogether. In July 2013, we issued Milestone Rights to the Milestone Purchasers. The Milestone Rights provide the Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and sales milestones, $65.0 million of which remains payable upon achievement of such milestones. See Note 12 – Commitments and Contingencies and Note 6 – Borrowings for further information related to the Milestone Rights. During the six months ended June 30, 2021, we used $34.2 million of cash for our operating activities as a result of our net loss of $48.4 million, partially offset by non-cash charges of $32.5 million of which $22.1 million was a loss on extinguishment of debt related to the first amendment of the Mann Group convertible note. The net change in operating asset and liabilities was primarily a result of the amortization of deferred revenue of $21.2 million and the payment of the Mann Group promissory note interest of $4.9 million, partially offset by the receipt of $5.3 million in customer deposits from UT for expansion equipment as well as other pass through payments, and an increase in operating payables and accrued expenses. 38 During the six months ended June 30, 2020, we used $14.9 million of cash for our operating activities as a result of our net loss of $19.6 million, in addition to a net cash outflow from changes in balances of operating assets and liabilities of $5.3 million, partially offset by non-cash charges of $10.0 million. The change in operating asset and liabilities was primarily a result of deferred revenue amortization of $16.4 million, partially offset by a milestone payment from UT of $12.5 million. Cash used in investing activities of $144.0 million for the six months ended June 30, 2021 was primarily due to the purchase of $138.9 million of debt securities and $3.0 million of Thirona convertible notes that was recognized as an available-for-sale investment. Cash provided by investing activities of $19.7 million for the six months ended June 30, 2020 was primarily due to the proceeds from the sale of treasury bills. Cash provided by financing activities of $173.5 million for the six months ended June 30, 2021 was primarily due to net proceeds from the offering of Senior convertible notes of $222.7 million, partially offset by the repayment of $35.1 million of Mann Group non-convertible notes and related unpaid accrued interest and the repayment of $10.0 million of principal and $1.0 million prepayment penalty for the MidCap credit facility. Cash provided by financing activities of $28.5 million for the six months ended June 30, 2020 was primarily due to the receipt of $12.6 million in gross proceeds from at-the-market offerings for an aggregate of 7,871,461 shares of our common stock under the CF Sales Agreement, the exercise of outstanding warrants to purchase shares of our common stock of $11.6 million, and proceeds from the PPP Loan of $4.9 million. Future Liquidity Needs We are not currently profitable and have rarely generated positive net cash flow from operations. In addition, we expect to continue to incur significant expenditures for the foreseeable future in support of our manufacturing operations, sales and marketing costs for Afrezza, and development costs for other product candidates in our pipeline. As of June 30, 2021, we had capital resources of $62.5 million in cash and cash equivalents, $100.0 million in short-term investments and $39.0 million in long-term investments, and we had an accumulated deficit of $3.1 billion and total principal amount of outstanding borrowings of $293.3 million. In March 2021, we issued $230.0 million of Senior convertible notes. In April 2021, we made a $10.0 million principal prepayment against outstanding term loans under the MidCap credit facility and repaid the entire principal amount of $35.1 million outstanding under the Mann Group non-convertible note (together with all accrued and unpaid interest thereon) as further disclosed in Note 6 – Borrowings . As amended, the MidCap credit facility provides a secured term loan facility with an aggregate principal amount of up to $100.0 million, of which $60.0 million remains available for borrowing if the conditions for Tranche 3 are met. We believe our resources will be sufficient to fund our operations for the next twelve months from the date of issuance of our condensed consolidated financial statements included in Part I – Financial Statements (Unaudited) . Off-Balance Sheet Arrangements As of June 30, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements. Contractual Obligations See Note 6 – Borrowings and Note 12 – Commitments and Contingencies for a discussion of material changes outside of the ordinary course of business in our contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in the Annual Report. 39