What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-09 · 335 added, 476 removed, 613 unchanged (57% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Cash and cash equivalents

Restricted cash

Short-term investments

8 unchanged sentences

Accrued expenses and other current liabilities

PPP loan — current

Financing liability — current

Deferred revenue — current

3 unchanged sentences

Midcap credit facility

Mann Group promissory notes

Accrued interest — Mann Group promissory notes

PPP loan — long term

2024 convertible notes

Promissory notes

Accrued interest — promissory notes

Financing liability — long term

Recognized loss on purchase commitments — long term

7 unchanged sentences

Undesignated preferred stock, $ 0.01 par value — 10,000,000 shares authorized;

no shares issued or outstanding as of September 30, 2021 and December 31, 2020

no shares issued or outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.01 par value - 400,000,000 shares authorized,

252,413,434 and 251,477,562 shares issued and outstanding

at September 30, 2021 and December 31, 2020, respectively

at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

6 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net revenue — commercial product sales

5 unchanged sentences

Selling, general and administrative

Asset impairment

(Gain) loss on foreign currency translation

Loss on purchase commitments

Gain on foreign currency translation

Total expenses

1 unchanged sentence

Other (expense) income:

Interest income

Interest income, net

Interest expense on financing liability

Interest expense on notes

Interest expense on Mann Group promissory notes

Gain (loss) on extinguishment of debt, net

Other income (expense)

Total other income (expense)

Other expense

Total other expense

Loss before provision for income taxes

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive loss:

Cumulative translation loss

Unrealized loss on available-for-sale securities

Comprehensive loss

See notes to condensed consolidated financial statements.

MANNKIND CORPORATION AND SUBSIDIARIES

MANNKIND CORPORATION AND SUBSIDIA RIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

2 unchanged sentences

BALANCE, JANUARY 1, 2021

Issuance of common stock under Employee

Stock Purchase Plan

Stock-based compensation expense

Issuance of common stock associated

with debt interest payment

Net issuance of common stock associated

with stock options and restricted stock

Issuance of common stock in at-the-market

Issuance cost associated with at-the-market

Write-off of cumulative translation loss

BALANCE, MARCH 31, 2020

Stock-based compensation expense

Issuance of common stock from the

exercise of warrants

Issuance of common stock pursuant to

conversion of the June 2020 note

Net issuance of common stock associated

with stock options and restricted stock

Issuance of common stock in at-the-market

Issuance cost associated with at-the-market

Issuance of common stock from market

price stock purchase

Adjustment of common stock in association

with restricted stock units

BALANCE, JUNE 30, 2020

Stock-based compensation expense

Issuance of common stock associated

with debt interest payment

Net issuance of common stock associated

with stock options and restricted stock

Issuance of common stock in at the market

Issuance cost associated with at the market

Issuance of common stock under Employee

Stock Purchase Plan

BALANCE, SEPTEMBER 30, 2020

Comprehensive

BALANCE, JANUARY 1, 2021

Net issuance of common stock associated

with stock options and restricted stock

Issuance of common stock under Employee

Stock Purchase Plan

Stock-based compensation expense

9 unchanged sentences

payoff of the 2024 convertible note

Issuance of common stock in at-the-market

Issuance cost associated with at-the-market

Issuance of at-the-market placement

Issuance costs associated with at-the-

market placement

BALANCE, MARCH 31, 2021

Net issuance of common stock associated

with stock options and restricted stock

Stock-based compensation expense

Premium on Mann Group convertible note

Issuance of common stock from market

price stock purchase

BALANCE, JUNE 30, 2021

Comprehensive

BALANCE, JANUARY 1, 2022

Net issuance of common stock associated

3 unchanged sentences

Stock-based compensation expense

BALANCE, SEPTEMBER 30, 2021

Issuance of common stock from market

price stock purchase plan

Cumulative loss on available-for-sale securities

BALANCE, MARCH 31, 2022

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on extinguishment of debt, net

Stock-based compensation expense

Interest on milestone payment

(Gain) loss on foreign currency translation

Depreciation, amortization and accretion

Interest expense on Mann Group promissory notes

Interest expense on financing liability

Depreciation and amortization

Amortization of right-of-use assets

Asset impairment

Write-off of inventory

Interest expense on promissory notes

Gain on foreign currency translation

Changes in operating assets and liabilities:

6 unchanged sentences

Recognized loss on purchase commitments

Deposits from customer

Accrued interest on Mann Group promissory notes

Customer deposits

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of debt securities

Purchase of debt securities

Purchase of available-for-sale securities

Proceeds from maturity of debt securities

Purchase of property and equipment

Proceeds from sale of treasury bills

Net cash (used in) provided by investing activities

Purchase of available-for-sale securities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Issuance costs associated with Senior convertible notes

Principal payments on Mann Group promissory notes

Payment of MidCap credit facility

Payment of MidCap credit facility prepayment penalty

Milestone payment

Proceeds from at-the-market offering

2 unchanged sentences

and exercise of stock options

Proceeds from market price stock purchase

Issuance of common stock from the exercise of warrants

Proceeds from PPP loan

Proceeds from market price stock purchase plan

Net cash provided by financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

1 unchanged sentence

SUPPLEMENTAL CASH FLOWS DISCLOSURES:

Interest paid in cash, net of amounts capitalized

Addition of right-of-use asset

Right-of-use asset modification

Addition of operating lease liability

Operating lease liability modification

Interest paid in cash

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Premium on Mann Group convertible note

Payment on Mann Group convertible note through issuance of common stock

Payment of 2024 convertible notes through issuance of common stock

Forgiveness of PPP loan

Non-cash construction in progress and property and equipment

Reclassification of investments from long-term to current

Common stock issuance to settle employee stock purchase plan liability

Non-cash construction in progress and property and equipment

Payment on Mann Group convertible note through issuance of common stock

Payment of 2024 convertible notes through common stock issuance

Reclassification of the PPP Loan from current to long-term

Payment of Mann Group convertible note interest through issuance of common stock

Issuance of common stock under Employee Stock Purchase Plan

Payment of interest on 2024 convertible notes through issuance of common stock

Payment of principal on Senior convertible notes through issuance of common stock

Receivable from at-the-market offering

Payment of interest on 2024 convertible notes through common stock issuance

See notes to condensed consolidated financial statements.

6 unchanged sentences

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included.

The results of operations for the three and nine months ended September 30, 2021 may not be indicative of the results that may be expected for the full year.

The results of operations for the three months ended March 31, 2022 may not be indicative of the results that may be expected for the full year.

Financial Statement Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

2 unchanged sentences

Management must apply significant judgment in this process and the COVID-19 pandemic has increased the level of judgment used by management in developing these estimates and assumptions.

The COVID-19 pandemic continues to rapidly evolve and the ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

The COVID-19 pandemic continues to evolve and the ultimate impact of the COVID-19 pandemic is uncertain and subject to change.

These effects could have a material impact on the estimates and assumptions used in the preparation of the condensed consolidated financial statements.

The more significant estimates include revenue recognition, including gross-to-net adjustments, stand-alone selling price considerations, assessing long-lived assets for impairment, clinical trial expenses, inventory costing and recoverability, recognized loss on purchase commitment, milestone rights liability, stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities, and the valuation allowance recorded against net deferred tax assets.

The more significant estimates include revenue recognition, including gross-to-net adjustments, stand-alone selling price considerations for recognition of collaboration revenue, assessing long-lived assets for impairment, clinical trial expenses, inventory costing and recoverability, recognized loss on purchase commitment, milestone rights liability, stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities, and the valuation allowance recorded against net deferred tax assets.

Business — MannKind is a biopharmaceutical company focused on the development and commercialization of inhaled therapeutic products for patients with endocrine and orphan lung diseases.

1 unchanged sentence

Food and Drug Administration (“FDA”) in June 2014.

The Company collaborates with a number of third parties to formulate their drugs on the Company’s Technosphere drug delivery platform.

Since September 2018, the Company has been collaborating with United Therapeutics Corporation (“United Therapeutics” or “UT”) to develop an inhaled formulation of treprostinil, known as Tyvaso DPI.

In April 2021, United Therapeutics submitted a new drug application (“NDA”) to the FDA seeking approval of Tyvaso DPI for the treatment of pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD).

In October 2021, the FDA issued a complete response letter to United Therapeutics pursuant to which the FDA declined to approve the NDA at this time, noting one deficiency related to an open inspection issue at a third-party analytical testing center for treprostinil.

The complete response letter did not pertain to MannKind, and no issues were cited by the FDA as it relates to MannKind’s facility in Connecticut for manufacturing, testing and packaging of finished Tyvaso DPI, including its associated device.

On October 18, 2021, UT stated that it believes that the single deficiency identified in the complete response will be resolved quickly and that Tyvaso DPI can receive approval by the summer of 2022, if not earlier.

The NDA was resubmitted in December 2021 following a complete response letter in October 2021.

The FDA is expected to complete its review of the NDA for Tyvaso DPI in May 2022.

Basis of Presentation — The condensed consolidated financial statements have been prepared in accordance with GAAP.

1 unchanged sentence

In addition, the Company expects to continue to incur significant expenditures for the foreseeable future in support of its manufacturing operations, sales and marketing costs for Afrezza, and development of other product candidates in the Company’s pipeline.

As of September 30, 2021, the Company had capital resources of $ 51.7 million in cash and cash equivalents, $ 87.3 million in short-term investments, $ 42.1 million in long-term investments, an accumulated deficit of $ 3.1 billion and total principal amount of outstanding borrowings of $ 288.4 million.

As of March 31, 2022, the Company had capital resources of $ 67.2 million in cash and cash equivalents, $ 95.2 million in short-term investments, $ 70.5 million in long-term investments, an accumulated deficit of $ 3.2 billion and $ 288.4 million of total principal amount of outstanding borrowings.

In August 2019, MannKind and its wholly owned subsidiary, MannKind LLC, entered into a credit and security agreement with MidCap Financial Trust (as amended, the “MidCap Credit Facility”).

The MidCap Credit Facility currently provides a secured term loan facility with a potential aggregate principal amount of up to $ 100.0 million, with a balance of $ 40.0 million outstanding as of September 30, 2021.

See Note 7 – Borrowings .

In March 2021, the Company issued $ 230.0 million of 2.50 % convertible senior notes due 2026 (the “Senior convertible notes”) to provide additional operating capital and pay down higher cost debt.

The cash received from this debt issuance has resolved the Company’s significant risks and uncertainties regarding sources of liquidity, which previously raised substantial doubt about the Company’s ability to continue as a going concern.

The Company believes its resources will be sufficient to fund its operations for the next twelve months from the date of issuance of these condensed consolidated financial statements.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported condensed consolidated balance sheets or statements of operations.

An adjustment has been made to the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 to combine payment of employment taxes related to vested restricted stock units and exercise of stock options in

the cash flows from financing activities.

These changes in classification do not affect previously re ported cash flows from operating or investing activities.

Principles of Consolidation — The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

Intercompany balances and transactions have been eliminated.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

Changes were made to the condensed consolidated statement of operations to disclose a single caption for interest expense on all outstanding notes.

Changes were made to the condensed consolidated balance sheets to reclassify interest receivable from investments from accounts receivable, net to other assets.

Segment Information — Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

1 unchanged sentence

Revenue Recognition — The Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services.

To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ ASC”) Topic 606, Revenue from Contracts with Customers , the Company performs the following five steps:

The Company recognizes revenue on product sales to a retail pharmacy as the product is dispensed to patients.

To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps:

(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.

The Company only applies the five-step model to arrangements that meet the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.

The Company has two types of contracts with customers:

(i) contracts for commercial product sales with wholesale distributors and specialty pharmacies and (ii) collaboration arrangements.

Revenue Recognition – Net Revenue – Commercial Product Sales – The Company sells Afrezza to a limited number of wholesale distributors and specialty pharmacies in the U.S.

(i) contracts for commercial product sales with wholesale distributors, specialty and retail pharmacies and (ii) collaboration arrangements.

Revenue Recognition – Net Revenue – Commercial Product Sales – The Company sells Afrezza to a limited number of wholesale distributors and specialty and retail pharmacies in the U.S.

(collectively, its “Customers”).

Wholesale distributors subsequently resell the Company’s products to retail pharmacies and certain medical centers or hospitals.

Specialty pharmacies sell directly to patients.

Specialty and retail pharmacies sell directly to patients.

In addition to distribution agreements with Customers, the Company enters into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.

The Company recognizes revenue on product sales when the Customer obtains control of the Company's product, which occurs at delivery for wholesale distributors and generally at delivery for specialty pharmacies.

The Company recognizes revenue on product sales to a retail pharmacy as the product is dispensed to patients.

Product revenues are recorded net of applicable reserves, including discounts, allowances, rebates, returns and other incentives.

7 unchanged sentences

Significant judgments are required in making these estimates.

Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

Overall, these reserves reduce recognized revenue to the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.

The Company’s analysis also contemplates application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of September 30, 2021 and, therefore, the transaction price was not reduced further during the nine months ended September 30, 2021.

The Company’s analysis also contemplates application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of March 3 1 , 202 2 and, therefore, the transaction price was not reduced further during the three months ended March 31, 2022 .

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future

vary from the Company’s estimates, the Company will adjust these estimates, which would affect net revenue — commercial product sales and earnings in the period such variances become known.

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net revenue — commercial product sales and earnings in the period such variances become known.

Significant judgment is required in estimating gross-to-net adjustments considering legal interpretations of applicable laws and regulations, historical experience, payer channel mix, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel.

21 unchanged sentences

The Company’s estimates include consideration of historical claims experience, payer channel mix, current contract prices, unbilled claims, claim submission time lags and inventory in the distribution channel.

Other Incentives — Other incentives which the Company offers include voluntary patient support programs, such as the Company's co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payers.

The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with the product that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

7 unchanged sentences

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment such as determining the performance obligation in the contract and determining the stand-alone selling price for each performance obligation identified in the contract.

With respect to our significant collaboration and service agreement with UT that includes a long-term commercial supply agreement (“CSA”), we have identified three distinct performance obligations:

(1) the license, supply of product to be used in clinical development, and continued development and approval support for Tyvaso DPI (“R&D Services and License”);

(2) development activities for the next generation of Next-Gen R&D Services;

and (3) a material right associated with future commercial manufacturing and supply of product (“Manufacturing Services”).

Pre-production activities under the CSA, such as facility expansion services and other administrative services, were considered bundled services under the Manufacturing Services performance obligation as required by ASC 606.

See Note 8 – Collaboration, Licensing and Other Arrangements.

If an arrangement has multiple performance obligations, the allocation of the transaction price is determined from observable market inputs, and the Company uses key assumptions to determine the stand-alone selling price, which may include development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success.

17 unchanged sentences

The Company’s collaborative agreements, for accounting purposes, represent contracts with customers and therefore are not subject to accounting literature on collaborative agreements.

The Company grants licenses to its intellectual property, supplies raw materials or finished goods, provides research and development services and offers sales support for the co-promotion of products, all of which are outputs of the Company’s ongoing activities, in exchange for consideration.

The Company does not develop assets jointly with collaboration partners, and does not share in significant risks of their development or commercialization activities.

Accordingly, the Company concluded that its collaborative agreements must generally be accounted for pursuant to Topic 606, Revenue from Contracts with Customers.

The Company grants licenses to its intellectual property, supplies raw materials , semi-finished goods or finished goods , provides research and development services and offers sales support for the co-promotion of products, all of which are outputs of the Company’s ongoing activities, in exchange for consideration.

Accordingly, the Company concluded that its collaborative agreements must generally be accounted for pursuant to ASC 606.

For collaboration agreements that allow collaboration partners to select additional optioned products or services, the Company evaluates whether such options contain material rights (i.e., have exercise prices that are discounted compared to what the Company would charge for a similar product or service to a new collaboration partner).

1 unchanged sentence

When these amounts in aggregate are not offered at a discount that exceeds discounts available to other customers, the Company concludes the option does not contain a material right, and therefore is not included in the transaction price at contract inception.

Rather, the Company evaluates grants of additional licensing rights upon option exercises to determine whether such should be accounted for as separate contracts.

The Company concluded there is no material right in these options.

The Company assessed the CSA agreement with UT and determined that a material right existed for the manufacturing services performance obligation.

The transaction price is allocated to the material right as well as the remaining performance obligations in accordance with ASC 606.

The Company also evaluates grants of additional licensing rights upon option exercises to determine whether such should be accounted for as separate contracts.

The Company follows detailed accounting guidance in measuring revenue and certain judgments affect the application of its revenue policy.

9 unchanged sentences

Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration, other revenue, and earnings in the period of adjustment.

PPP loan — In April 2020, the Company received the proceeds from a loan in the amount of approximately $ 4.9 million (the “PPP loan”) from JPMorgan Chase Bank, N.A., as lender, pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Company accounted for the PPP loan as a financial liability in accordance with ASC Topic 470, Debt .

Accordingly, the PPP loan was recognized as current and long-term debt in the Company’s consolidated balance sheets and is included as PPP loan — current and PPP loan — long term.

In addition, a de minimis amount of accrued interest is included in accrued expenses and other current liabilities.

On July 28, 2021, the Company received notification from the U.S.

Small Business Administration (“SBA”) that the full principal amount of the PPP loan was forgiven.

See Note 6 – Borrowings for additional information.

Cost of Goods Sold — Cost of goods sold includes material, labor costs and manufacturing overhead.

Cost of goods sold also includes a significant component of current period manufacturing costs in excess of costs capitalized into inventory (excess capacity costs).

Cost of goods sold also includes a component of current period manufacturing costs in excess of costs capitalized into inventory (“excess capacity costs”).

These costs, in addition to the impact of the revaluation of inventory for standard costing, and write-offs of inventory are recorded as expenses in the period in which they are incurred, rather than as a portion of inventory costs.

The cost of goods sold excludes the cost of insulin purchased under the Company’s Insulin Supply Agreement (the “Insulin Supply Agreement”) with Amphastar Pharmaceuticals, Inc.

Cost of goods sold excludes the cost of insulin purchased under the Company’s Insulin Supply Agreement (the “Insulin Supply Agreement”) with Amphastar Pharmaceuticals, Inc.

(“Amphastar”) .

All insulin inventory on hand was written off and the full purchase commitment contract to purchase future insulin was accrued as a recognized loss on purchase commitments as of the end of 2015.

Cost of Revenues – Collaborations and Services — Cost of revenues – collaborations and services includes material, labor costs, manufacturing overhead, and excess capacity costs.

These costs, in addition to the write-offs of inventory are recorded as expenses in the period in which they are incurred, rather than as a portion of inventory costs.

Cost of revenues – collaborations and services also includes the cost of product development.

Cash and Cash Equivalents and Restricted Cash — The Company considers all highly liquid investments with original or remaining maturities of 90 days or less at the time of purchase, that are readily convertible into cash to be cash equivalents.

As of September 30, 2021 and December 31, 2020, cash equivalents were comprised of money market accounts and U.S.

Treasury securities with maturities less than 90 days from the date of purchase.

As of March 31, 2022 and December 31, 2021, cash equivalents were comprised of money market, corporate bonds and commercial paper accounts with original maturities less than 90 days from the date of purchase.

The Company records restricted cash when cash and cash equivalents are restricted as to withdrawal or usage.

1 unchanged sentence

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheets that sum to amounts reported on the condensed consolidated statements of cash flows (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

September 30, 2020

March 31, 2021

Cash and cash equivalents

3 unchanged sentences

Treasury securities.

For the three and nine months ended September 30, 2021, the Company held short-term and long-term investments of debt securities, including commercial paper and bonds.

The Company intends to hold its investments until maturity and are therefore stated at amortized cost.

Those investments with maturities less than 12 months are included in short-term investments and investments with maturities in excess of twelve months are included in long-term investments in the condensed consolidated balance sheets.

The amortization of the Company’s investments is recognized as interest expense in the condensed consolidated statements of operations and was approximately $ 0.2 million and $ 0.3 million for the three and nine months ended September 30, 2021, respectively.

There was no such amortization for the three or nine months ended September 30, 2020.

No allowance for credit losses on held-to-maturity securities was required as of September 30, 2021.

As of March 31, 2022, the Company held short-term and long-term investments of debt securities, including commercial paper and bonds.

The Company assesses whether it has any intention to sell the investment before maturity, whether any declines in fair value are the result of credit losses, as well as whether there were other-than-temporary impairments associated with the available for sale investment.

The Company intends to hold its investments until maturity;

therefore, these investments are stated at amortized cost.

The investments with maturities less than 12 months are included in short-term investments and investments with maturities in excess of twelve months are included in long-term investments in the condensed consolidated balance sheets.

The amortization or accretion of the Company’s investments is recognized as interest income in the condensed consolidated statements of operations.

Available-for-Sale Investment — In June 2021, the Company invested $ 3.0 million in Thirona Bio, Inc.

(“Thirona”) and received a $ 3.0 million convertible promissory note, the “Thirona convertible note”).

In January 2022, the Company invested an additional $ 5.0 million in Thirona and received a $ 5.0 million convertible promissory note.

Unless earlier converted into conversion shares pursuant to the note purchase agreement, the principal and accrued interest shall be due and payable by Thirona on demand by the Company at any time after the maturity date of December 31, 2023 .

Interest shall accrue at a rate of 6 % per annum.

Interest accrues at a rate of 6 % per annum.

The Thirona convertible note is a general unsecured obligation of Thirona.

2 unchanged sentences

Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized.

The Company determines fair value of its available-for-sale investments using level 3 inputs.

As of September 30, 2021, the Company evaluated the fair value of its investment in Thirona and determined that the fair value approximates the carrying value of $ 3.0 million.

The Company assesses whether it has any intention to sell the investment, determines fair value of its available-for-sale investments using level 3 inputs as well as assesses whether there were other-than-temporary impairments associated with the available-for-sale investment.

In June 2021, the Company and Thirona also entered into a collaboration agreement to develop a compound for the treatment of fibrotic lung diseases.

7 unchanged sentences

The cash equivalents and investments are regularly monitored by management.

Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable are recorded at the invoiced amount and are not interest bearing.

Accounts receivable are presented net of an allowance for doubtful accounts if there are estimated losses resulting from the inability of its customers to make required payments.

The Company makes ongoing assumptions relating to the collectability of its accounts receivable in its calculation of the allowance for doubtful accounts.

Accounts Receivable and Allowance for Credit Losses — Accounts receivable are recorded at the invoiced amount and are not interest bearing.

Accounts receivable are presented net of an allowance for credit losses if there are estimated losses resulting from the inability of its customers to make required payments.

The Company makes ongoing assumptions relating to the collectability of its accounts receivable in its calculation of the allowance for credit losses.

The allowance for expected credit losses is based primarily on past collections experience relative to the length of time receivables are past due.

However, when available evidence reasonably supports an assumption that future economic conditions will differ from current and historical payment collections, an adjustment is reflected in the allowance for expected credit losses.

Accounts receivable are also presented net of an allowance for product returns and trade discounts and allowances because the Company’s customers have the right of setoff for these amounts against the related accounts receivable.

19 unchanged sentences

Any write-downs are treated as permanent reductions in the carrying amount of the asset and recognized as an operating loss.

In August 2019, the Company recorded a $ 1.5 million commitment asset and a $ 0.4 million other asset for deferred debt issuance costs related to the future funding commitments of the MidCap Credit Facility.

A quarterly assessment was performed during the second quarter of 2020 to determine if the Company was on target to achieve certain required milestone conditions in order for the Company to access further borrowings under the MidCap credit facility.

The Company determined that such milestone conditions related to Afrezza trailing net revenue were unlikely to be achieved.

As a result, an asset impairment of $ 1.9 million is reflected in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2020 .

See Note 6 – Borrowings for further information on the MidCap credit facility.

Recognized Loss on Purchase Commitments — The Company assesses whether losses on long-term purchase commitments should be accrued.

3 unchanged sentences

If, subsequent to an accrual, a purchase commitment is successfully renegotiated, the gain is recognized in the Company’s condensed consolidated statements of operations.

The liability balance of the recognized loss on insulin purchase commitments was $ 85.3 million and $ 95.3 million as of September 30, 2021 and December 31, 2020, respectively.

No new contracts were identified in 2020 or in the first nine months of 2021 that required a new loss on purchase commitment accrual.

Milestone Rights Liability — On July 1, 2013, in conjunction with the execution of a financing facility with Deerfield Private Design Fund II L.P.

and Deerfield Private Design International I L.P.

, the Company issued to Deerfield Private Design Fund II, L.P.

and Horizon Santé FLML SÁRL (the “Milestone Purchasers”) certain rights to receive payments of up to $ 90.0 million, of which $ 65.0 million remains payable as of September 30, 2021 upon the occurrence of specified strategic and sales milestones, including the achievement of specified net sales figures (the “Milestone Rights”).

The Company analyzed the Milestone Rights and determined that they did not meet the definition of a freestanding derivative.

Since the Company has not elected to apply the fair value option to the Milestone Rights, the Company recorded them at their estimated initial fair value and accounted for the Milestone Rights as a liability.

The liability balance of the recognized loss on insulin purchase commitments as of March 31, 2022 and December 31, 2021 was $ 79.3 million and $ 82.8 million, respectively.

No new contracts were identified in 2021 or in the first three months of 2022 that required a new loss on purchase commitment accrual.

Milestone Rights Liability — In July 2013, in conjunction with the execution of a (now repaid) loan agreement with Deerfield Private Design Fund II, L.P.

and Deerfield Private Design International II, L.P.

(collectively, “Deerfield”) , the Company entered into a Milestone Rights Purchase Agreement (the “Milestone Rights Agreement”) pursuant to which the Company issued certain milestone rights to Deerfield Private Design Fund II, L.P.

and Horizon Santé FLML SÁRL (the “Original Milestone Purchasers”).

The foregoing milestone rights provided the Original 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 (collectively, the “Milestone Rights”).

In December 2021, the Milestone Rights were purchased by Barings Global Special Situations Credit Fund 4 (Delaware), L.P.

and Barings Global Special Situations Credit 4 (LUX) S.ar.l.

(together the “Milestone Purchasers”).

As a result, the Milestone Purchasers have assumed the obligations of the Original Milestone Purchasers and is now entitled to all rights under the Milestone Rights Agreement.

As of March 31, 2022, $ 65.0 million remained payable pursuant to the Milestone Rights Agreement upon achievement of Afrezza net sales milestones.

The initial fair value estimate of the Milestone Rights was calculated using the income approach in which the cash flows associated with the specified contractual payments were adjusted for both the expected timing and the probability of achieving the milestones and discounted to present value using a selected market discount rate.

3 unchanged sentences

Specifically, as each milestone event is achieved, the portion of the initially recorded Milestone Rights liability that pertains to the milestone event being achieved, will be remeasured to the amount of the specified related milestone payment.

The resulting change in the balance of the Milestone Rights liability due to remeasurement will be recorded in the Company’s consolidated statements of operations as interest expense.

The resulting change in the balance of the Milestone Rights liability due to remeasurement will be recorded in the Company’s condensed consolidated statements of operations as interest expense.

Furthermore, the Milestone Rights liability will be reduced upon the settlement of each milestone payment.

13 unchanged sentences

For uncertain tax positions, the Company determines whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements.

tax positions where it is “not more likely than not” that a tax benefit will be sustained, no tax benefit is recognized.

For those tax positions where it is “not more likely than not” that a tax benefit will be sustained, no tax benefit is recognized.

Penalties, if probable and reasonably estimable, are recognized as a component of income tax expense.

12 unchanged sentences

Clinical Trial Expenses — Clinical trial expenses, which are primarily reflected in research and development expenses in the condensed consolidated statements of operations, result from obligations under contracts with vendors, consultants and clinical site agreements in addition to internal costs associated with conducting clinical trials.

Recently Adopted Accounting Standards — In August 2020, the FASB issued ASU 2020-06, Issuer’s Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The Company early adopted this standard as of January 1, 2021 .

The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Net Income (Loss) Per Share of Common Stock — Basic net income or loss per share excludes dilution for potentially dilutive securities and is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period.

Diluted net income or loss per share reflects the potential dilution under the treasury method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For periods where the Company has presented a net loss, potentially dilutive securities are excluded from the computation of diluted net loss per share as they would be anti-dilutive.

Recently Issued Accounting Standards — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date.

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s condensed consolidated financial position or results of operations upon adoption.

Held-to-Maturity Investments — Investments consist of highly liquid investments that are intended to facilitate liquidity and capital preservation.

As of March 31, 2022, the Company held $ 95.2 million of short-term investments and $ 70.5 million of long-term investments.

As of December 31, 2021, the Company held $ 79.9 million of short-term investments and $ 56.6 million of long-term investments.

For the three months ended March 31, 2022, the Company recognized $ 0.4 million of interest income on investments and $ 0.3 million of amortization on certain investments.

The interest income net of amortization on investments is reflected as interest income, net on the condensed consolidated statement of operations.

For the three months ended March 31, 2021, the Company recognized a de minimis amount of interest income on investments.

No allowance for credit losses on held-to-maturity securities was required as of March 31, 2022.

Available-for-Sale Investment — The Thirona convertible notes are classified as available-for-sale securities and are included in other assets in the condensed consolidated balance sheet.

Available-for-sale investments are subsequently measured at fair value.

Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized.

The Company determines fair value of its available-for-sale investments using level 3 inputs.

The Company evaluated the fair value of its investment in Thirona as of March 31, 2022 by applying a Monte Carlo simulation and determined that the fair value was $ 6.9 million.

The fair value of the investment in Thirona as of December 31, 2021 was $ 3.0 million, which approximated carrying value.

For the three months ended March 31, 2022, an unrealized holding loss of $ 1.1 million was recognized as other comprehensive loss in our condensed consolidated statements of comprehensive loss and condensed consolidated statements of stockholders’ deficit.

The fair value of the cash equivalents, long- and short-term investments are disclosed below (amounts in millions).

March 31, 2022

Investment Level

Amortized Cost

(Carrying Value)

Gross Unrealized

Holding Losses

Commercial bonds and paper

Money market funds

Total cash equivalents and investments

Less cash equivalents

Total Investments

December 31, 2021

Investment Level

Amortized Cost

(Carrying Value)

Gross Unrealized

Holding Losses

Commercial bonds and paper

Money market funds

Total cash equivalents and investments

Less cash equivalents

Total Investments

As of March 31, 2022 and December 31, 2021, there was $ 0.5 million and $ 0.3 million, respectively, of interest receivable included in our condensed consolidated balance sheets as prepaid expenses and other current assets.

Accounts Receivable

Accounts receivable, net consists of the following (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

9 unchanged sentences

Total accounts receivable, net

As of September 30, 2021 and December 31, 2020, the allowance for doubtful accounts for accounts receivable – commercial was de minimis .

The Company had three wholesale distributors representing approximately 87 % of commercial accounts receivable as of September 30, 2021 and approximately 81 % and 82 % of gross sales for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2021, the allowance for accounts receivable – collaborations and services was $ 0.8 million and was related to $ 1.5 million of accounts receivable for Vertice Pharma, a collaboration partner for the co-promotion of Thyquidity.

The Company had one collaboration partner, United Therapeutics, that comprised approximately 79 % of the collaboration and services accounts receivable as of September 30, 2021 and approximately 99 % and 95 % of gross sales from collaborations and services for the three and nine months ended September 30, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the allowance for doubtful accounts for accounts receivable – commercial was de minimis .

The Company had three wholesale distributors representing approximately 74 % of commercial accounts receivable as of March 31, 2022 and approximately 69 % of gross sales for the three months ended March 31, 2022.

As of March 31, 2022, the allowance for credit losses for accounts receivable – collaborations and services of $ 0.8 million was related to $ 0.8 million of accounts receivable for Vertice Pharma for the co-promotion of Thyquidity.

The Company had one collaboration partner, United Therapeutics, that comprised 100 % of the collaboration and services net accounts receivable as of March 31, 2022 and approximately 94 % of gross revenue from collaborations and services for the three months ended March 31, 2022.

Inventories consist of the following (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

3 unchanged sentences

Total inventory

Work-in-process and finished goods as of September 30, 2021 and December 31, 2020 include conversion costs and exclude the cost of insulin.

Work-in-process and finished goods as of March 31, 2022 and December 31, 2021 include conversion costs and exclude the cost of insulin.

All insulin inventory on hand was written off and the projected loss on the purchase commitment contract to purchase future insulin was accrued as of the end of 2015.

Raw materials inventory included $ 0.8 million of pre-launch inventory as of September 30, 2021 and December 31, 2020, which consisted of FDKP received in November 2019 that will be used to manufacture Afrezza under an enhanced manufacturing process for FDKP.

The Company expects to receive FDA approval of the new source of FDKP in 2023, after which the pre-launch raw materials inventory will be reclassified as raw materials inventory for use in the manufacturing of Afrezza and Tyvaso DPI.

Raw materials inventory included $ 0.8 million of pre-launch inventory as of March 31, 2022 and December 31, 2021, which consisted of FDKP received in November 2019.

The Company expects to receive FDA approval of the new source of FDKP in 2023.

The Company analyzed its inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value.

The Company also performed an assessment of projected sales and evaluated the lower of cost or net realizable value and the potential excess inventory on hand.

Inventory that was forecasted to become obsolete due to expiration is recorded in costs of goods sold in the condensed consolidated statements of operations.

For the nine months ended September 30, 2020, there was an inventory write-off of $ 0.5 million as a result of this assessment.

There were no inventory write-offs for the three months ended September 30, 2020 or the three and nine months ended September 30, 2021.

The Company also performed an assessment of projected sales and evaluated the lower of cost or net realizable value and the potential excess inventory on hand at March 31, 2022 and December 31, 2021.

Inventory that was forecasted to become obsolete due to expiration as well as inventory that does not meet acceptable standards is recorded in costs of goods sold in the condensed consolidated statements of operations.

There were no inventory write-offs for the three months ended March 31, 2022 or 2021.

Property and Equipment

1 unchanged sentence

Estimated Useful

September 30, 2021

March 31, 2022

December 31, 2021

8 unchanged sentences

Construction in progress includes $ 7.7 million of equipment under construction for the manufacturing expansion for UT (the “UT Equipment”).

The Company acts as agent on behalf of UT for the procurement of the UT Equipment.

The Company has received $ 7.1 million in deposit for this service, which was recognized as deposits from customer in the condensed consolidated balance sheet as of March 31, 2022.

See Note 8 – Collaboration, Licensing and Other Arrangements .

Depreciation expense related to property and equipment for the three and nine months ended September 30, 2021 and 2020 was as follows (in thousands):

Depreciation expense related to property and equipment for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Depreciation Expense

On November 8, 2021 , the Company closed a transaction to sell certain real estate located at One Casper Street, Danbury, CT (the “Property”) to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $ 102.3 million, subject to terms and the conditions contained in a purchase and sale agreement.

On November 8, 2021 , the Company sold certain land, building and improvements located in Danbury, CT (the “Property”) to an affiliate of Creative Manufacturing Properties (the “Purchaser”) for a sales price of $ 102.3 million, subject to terms and the conditions contained in a purchase and sale agreement.

Effective with the closing of this transaction, the Company entered into a 20 -year lease agreement with the Purchaser (the “Sale-Leaseback Transaction”) .

See Note 14 – Subsequent Event .

The sale of the Property and subsequent lease did not result in the transfer of control of the Property to the Purchaser;

therefore, the Sale-Leaseback Transaction qualified as a failed sale leaseback transaction whereby the lease is accounted for as a finance lease and the Property remains as a long-lived asset of the Company and is depreciated at its remaining useful life of 20 years or less.

See Note 13 – Commitments and Contingencies .

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised of the following (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Discounts and allowances for commercial product sales

Accrued interest

Deferred lease liability

Milestone rights liability — current

Danbury facility buildout

Deferred lease liability

Current portion of milestone rights liability

Professional fees

Sales and marketing services

Total accrued expenses and other current liabilities

Carrying amount of principal borrowings consist of the following (in thousands):

September 30, 2021

Accrued interest

Retail inventory purchase

Accrued expenses and other current liabilities

Carrying amount of borrowings consist of the following (in thousands):

March 31, 2022

December 31, 2021

2 unchanged sentences

Mann Group promissory notes

2024 convertible notes

Total debt — net carrying amount

___________________

The amendment to the Mann Group convertible note in the second quarter of 2021 resulted in a substantial premium of $ 22.1 million based on the fair value post modification, which contributed to the loss on extinguishment in the condensed consolidated statement of operations for the nine months ended September 30, 2021 and was recognized as additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2021.

The accounting for the $ 22.1 million loss on extinguishment did not result in a change in the financial position of the Company.

The following table provides a summary of the Company’s debt and key terms as of September 30, 2021:

September 30, 2021

The following table provides a summary of the Company’s debt and key terms:

March 31, 2022

December 31, 2021

4 unchanged sentences

$ 230.0 million

MidCap credit facility (1)

6 unchanged sentences

December 2025

Mann Group non-convertible note (3)

$ 35.1 million (plus $ 3.6 million accrued interest paid-in-kind)

November 2024

$ 4.9 million

2024 convertible notes (5)

$ 5.0 million

November 2024

______________________________________________

3 unchanged sentences

The interest rate prior to the amendment was 7.00 % and the maturity date was in November 2024 .

In April 2021, the Company prepaid $ 35.1 million principal balance as well as accrued unpaid interest .

In July 2021, the Company received full forgiveness from the SBA for the $ 4.9 million principal balance of the PPP loan and recognized a gain on extinguishment of debt for the full principal balance and a de minimis amount of accrued but unpaid interest .

In February 2021, the $ 5.0 million principal balance was converted into 1,666,667 shares of the Company’s common stock .

The maturities of the Company’s borrowings as of September 30, 2021 are as follows (in thousands):

The maturities of the Company’s borrowings as of March 31, 2022 are as follows (in thousands):

Total principal payments

Debt issuance cost

Unamortized discount

Debt issuance costs

Total debt — net carrying amount

6 unchanged sentences

The Senior convertible notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2025, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, par value $ 0.01 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of

the conversion price for the Senior convertible notes on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price (as defined in the Indenture) per $ 1,000 principal amount of the Senior convertible notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day;

(2) during the five business day period after any

ten consecutive trading day period in which the trading price (as defined in the Indenture) per $ 1,000 principal amount of the Senior convertible notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the c ommon s tock and the conversion rate on each such trading day;

(3) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Senior convertible notes called (or deemed called) for redemption;

1 unchanged sentence

On or after December 1, 2025 until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Common Stock or a combination of cash and shares of Common Stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture.

Upon conversion, the Company will pay or deliver , as the case may be, cash , shares of c ommon s tock or a combination of cash and shares of c ommon s tock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture.

The initial conversion rate is 191.8281 shares of common stock per $ 1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $ 5.21 per share of common stock).

14 unchanged sentences

and (ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under the Indenture.

The Company’s net proceeds from the Offering were approximately $ 222.7 million, after deducting the initial purchasers’ discounts and commissions and the estimated Offering expenses payable by the Company.

As of September 30, 2021, the unamortized debt issuance cost was $ 6.4 million.

The Company’s net proceeds from the o ffering were approximately $ 222.7 million, after deducting the initial purchasers’ discounts and commissions and the estimated o ffering expenses payable by the Company .

As of March 31, 2022 , the unamortized debt issuance cost was $ 5.7 million.

MidCap credit facility — I n August 2019, the Company entered into the MidCap credit facility and borrowed the first advance of $ 40.0 million (“Tranche 1”) in August 2019 and the second advance of $ 10.0 million (“Tranche 2”) in December 2020.

1 unchanged sentence

Under the terms of the MidCap credit facility, a third advance of $ 60.0 million (“Tranche 3”) will be available to the Company between January 1, 2022 and June 30, 2022, subject to the satisfaction of certain milestone conditions associated with Tyvaso DPI ™ through the Company’s collaboration with United Therapeutics (see Note 8 – Collaboration, Licensing and Other Arrangements ).

In December 2019, the Company entered into the first amendment to the MidCap credit facility, pursuant to which the parties agreed to (i) amend the financial covenant relating to trailing twelve month minimum Afrezza Net Revenue (as defined in the MidCap credit facility) requirements, (ii) add a condition to the third advance that requires the Company achieve certain amounts of Afrezza Net Revenue, and (iii) increase the exit fee from 6.00 % to 7.00 % of the principal amount of all term loans advanced to the Company under the MidCap credit facility.

In August 2020, the Company entered into the second amendment to the MidCap credit facility, pursuant to which the parties agreed that no breach of the minimum Afrezza net revenue covenant for any trailing twelve-month reporting period between July 31, 2020 and November 30, 2020 will be deemed to occur if the Company delivers satisfactory evidence that it had unrestricted cash of at least $ 40.0 million.

Without this amendment, the Company would have been in violation of the minimum Afrezza net revenue covenant as of September 30, 2020.

In November 2020, the Company entered into the third amendment to the MidCap credit facility, pursuant to which the parties agreed to (i) amend the conditions to draw Tranche 2, which had become unavailable, such that the advance became available and was, in fact, funded to the Company on December 1, 2020, (ii) amend the conditions to Tranche 3 such that the third advance was available upon the satisfaction of certain conditions, including certain milestone conditions associated with Tyvaso DPI, (iii) add a covenant that requires the marketing of Tyvaso DPI if the third advance is funded, (iv) amend the financial covenant relating to trailing twelve month minimum Afrezza Net Revenue (as defined in the MidCap credit facility) requirements, (v) increase the minimum cash covenant to $ 30.0 million at all times, (vi) extend the interest only period until September 1, 2022, at which time principal on each term loan advance is payable in 24 equal monthly installments, and (vii) amend the prepayment fees.

In connection with the extension of the interest only period for the $ 40.0 million drawn under Tranche 1, a $ 0.2 million loss on extinguishment was recognized in the consolidated statements of operations for the year ended December 31, 2020.

The funding of $ 10.0 million under Tranche 2 resulted in the recognition of approximately $ 0.3 million of debt discount and a de minimis amount of debt issuance costs.

In December 2020, the Company entered into the fourth and fifth amendments to the MidCap credit facility.

Pursuant to the fourth amendment, MidCap consented to the acquisition by the Company of QrumPharma, Inc.

Pursuant to the omnibus joinder and fifth amendment, QrumPharma was joined as a borrower to the MidCap credit facility and to certain related financing documents.

In March 2021 the Company entered into the sixth amendment to the MidCap credit facility to accommodate the issuance of the Senior convertible notes.

On April 22, 2021, the Company entered into the seventh amendment of the MidCap credit facility, pursuant to which the parties agreed to, among other things, (i) increase the amount available under the third advance from $ 25.0 million to $ 60.0 million and extend the date through which the third advance is available to June 30, 2022 , (ii) amend the conditions to the third advance of $60.0 million being available to draw, including certain milestone conditions associated with Tyvaso DPI, (iii) remove the Company’s obligation to issue a warrant to purchase shares of the Company’s common stock upon drawing down the third advance, (iv) extend the interest-only period until September 1, 2023 and extend the maturity date until August 1, 2025 , (v) amend the financial covenant relating to trailing 12 month minimum Afrezza net revenue, (vi) decrease the minimum cash covenant, (vii) decrease the interest rate on any amounts outstanding, now or in the future, under the MidCap credit facility, (viii) permit the Company to make certain acquisitions, subject to requirements, and (ix) permit the Company to make investments of up to an additional $ 9.0 million so long as the Company has $ 90.0 million or more of unrestricted cash and short-term investments following such investment.

The MidCap credit facility has been amended several times, most recently in April 2021, pursuant to which the parties agreed to, among other things, (i) increase the amount available under the third advance from $ 25.0 million to $ 60.0 million and extend the date through which the third advance is available to June 30, 2022 , (ii) amend the conditions to the third advance of $60.0 million being available to draw, including certain milestone conditions associated with Tyvaso DPI, (iii) remove the Company’s obligation to issue a warrant to purchase shares of the Company’s common stock upon drawing down the third advance, (iv) extend the interest-only period until September 1, 2023 and extend the maturity date until August 1, 2025 , (v) amend the financial covenant relating to trailing 12 month minimum Afrezza net revenue, (vi) decrease the minimum cash covenant, (vii) decrease the interest rate on any amounts outstanding, now or in the future, under the MidCap credit facility, (viii) permit the Company to make certain acquisitions, subject to requirements, and (ix) permit the Company to make investments of up to an additional $ 9.0 million so long as the Company has $ 90.0 million or more of unrestricted cash and short-term investments following such investment.

Concurrent with entering into this amendment, the Company made a $ 10.0 million principal prepayment against outstanding term loans under the MidCap credit facility and paid a related $ 1.0 million exit fee in lieu of the unaccrued portion of the original exit fee and prepayment penalties that would otherwise have been due with respect to the partial prepayment.

The prepayment penalty of $ 1.0 million related to the payment of $ 10.0 million was capitalized and will be amortized over the remaining life of the debt.

As of March 31, 2022, the unamortized debt discount was $ 0.3 million and the unamortized prepayment penalty was $ 0.7 million.

Tranche 1, Tranche 2 and, if borrowed, Tranche 3, each accrue interest at an annual rate equal to the lesser of (i) 8.25 % and (ii) the one-month LIBOR (subject to a one-month LIBOR floor of 1.00 %) plus 6.25 %.

5 unchanged sentences

Tranche 3 will be subject to a similar scheme of early termination fees measured from the anniversary of the funding date for such tranche, if ever.

The prepayment penalty of $ 1.0 million related to the payment of $ 10.0 million was capitalized and will be amortized over the remaining life of the debt.

As of September 30, 2021, the unamortized debt discount was $ 0.4 million and the unamo rtized prepayment penalty was $ 0.9 million .

The Company’s obligations under the MidCap credit facility are secured by a security interest on substantially all of its assets, including intellectual property.

3 unchanged sentences

however, this covenant will be eliminated in the event that Tyvaso DPI is approved by the FDA.

As of September 30, 2021, the Company was in compliance with the financial and minimum cash covenants.

As of March 31, 2022, the Company was in compliance with the financial and minimum cash covenants.

The MidCap credit facility also contains customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, listing of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties.

1 unchanged sentence

During the existence of an event of default, interest on the term loans could be increased by 2.00 %.

The Company also agreed to issue warrants to purchase shares of the Company’s common stock (the “MidCap warrants”) upon the drawdown of Tranches 1 and 2 in an aggregate amount equal to 3.25 % of the amount drawn, divided by the exercise price per share for that tranche.

The exercise price per share is equal to the volume-weighted average closing price of the Company’s common stock for the ten business days immediately preceding the second business day before the issue date.

As a result of Tranche 1, the Company issued warrants to purchase an aggregate of 1,171,614 shares of the Company’s common stock, at an exercise price equal to $ 1.11 per share.

As a result of Tranche 2, the Company issued warrants to purchase an aggregate of 111,853 shares of the Company’s common stock, at an exercise price equal to $ 2.91 per share.

The Company determined that these warrants met the criteria for equity classification and accounted for such warrants in additional paid-in capital.

Subsequent to September 30, 2021, the Tranche 1 and Tranche 2 MidCap warrants were exercised in full.

Mann Group promissory notes — In August 2019, the Company issued a $ 35.0 million note that is convertible into shares of the Company’s common stock at $ 2.50 per share (the “Mann Group convertible note”) and issued a non-convertible note to Mann Group in an aggregate principal amount of $ 35.1 million (the “Mann Group non-convertible note” and , together with the Mann Group convertible note, the “Mann Group promissory notes”) as part of a restructuring of its then existing indebtedness to Mann Group.

The Mann Group promissory notes each accrued interest at the rate of 7.00 % per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter beginning October 1, 2019 .

On April 22, 2021, the Company and Mann Group entered into an amendment of the Mann Group convertible note, pursuant to which the parties agreed to (i) reduce the interest rate from 7.0% to 2.5 % effective on April 22, 2021, and (ii) extend the maturity date from November 3, 2024 to December 31, 2025 .

The Mann Group promissory notes originally accrued interest at the rate of 7.00 % per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter beginning October 1, 2019 .

In April 2021, the Company 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.

On the same date, the Company and Mann Group amended the Mann Group convertible note, pursuant to which the parties agreed to (i) reduce the interest rate from 7.0% to 2.5 % effective on April 22, 2021, and (ii) extend the maturity date from November 3, 2024 to December 31, 2025 .

The amendment to the Mann Group convertible note resulted in a debt extinguishment with a substantial premium based on the fair value post extinguishment.

The fair value in excess of the face amount of $ 18.4 million contributed to a loss on extinguishment of $ 22.1 million in the condensed consolidated statement of operations for the three and nine months ended September 30, 2021 and resulted in a corresponding debt premium of $ 22.1 million which was recognized as additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2021.

The fair value in excess of the face amount of $ 18.4 million contributed to a loss on extinguishment of $ 22.1 million in the consolidated statement of operations for the year ended December 31, 2021 and resulted in a corresponding debt premium of $ 22.1 million which was recognized as additional paid-in capital in the consolidated balance sheet as of December 31, 2021.

The accounting for the $22.1 million loss on extinguishment did not result in a change in the financial position of the Company.

4 unchanged sentences

provided that with respect to interest accruing from and after January 1, 2021, the Company may, at its option, elect to pay any such interest on any interest payment date, if certain conditions are met, in shares of the Company’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the payment date.

Pursuant to the terms of the Mann Group convertible note, Mann Group converted $ 3.0 million of accrued interest and $ 7.0 million of principal into 1.2 million shares and 2.8 million shares, respectively, of the Company’s common stock in the fourth quarter of 2020.

During the nine months ended September 30 , 2021 , Mann Group converted $ 0.4 million of interest and $ 9.6 million of principal into 4,000,000 shares of common stock.

On April 22, 2021, the Company 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.

PPP loan – On April 10, 2020, the Company received the proceeds from the PPP loan from JPMorgan Chase Bank, N.A., as lender, in the amount of approximately $ 4.9 million pursuant to the PPP of the CARES Act.

On July 28, 2021, the Company received notification from the SBA that the full principal amount of the PPP loan was forgiven.

The Company recognized a $ 4.9 million gain on extinguishment of debt for the forgiveness of the principal amount and accrued but unpaid interest for the three and nine months ended September 30, 2021.

Prior to being forgiven, the PPP loan was evidenced by a promissory note dated April 9, 2020 that matured on April 9, 2022 and bore interest at a rate of 0.98 % per annum (which was being deferred).

The Company used all proceeds from the PPP loan to retain employees, maintain payroll and make lease, interest and utility payments.

2024 convertible notes — In August 2019, the Company issued 5.75 % convertible senior subordinated exchange notes due November 2024 (the “ 2024 convertible notes”) pursuant to an indenture, dated as of August 6, 2019, between the Company and U.S.

Bank National Association, as trustee (the “2019 Indenture”).

The 2024 convertible notes were the Company’s general, unsecured obligations, and were subordinated in right of payment to the indebtedness incurred pursuant to the MidCap credit facility.

The 2024 convertible notes ranked equally in right of payment with the Company’s other unsecured senior debt.

The 2024 convertible notes accrued interest at the rate of 5.75 % per year on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning February 15, 2020, with interest accruing from August 6, 2019.

Interest on the 2024 convertible notes was payable in cash or, at the option of the Company if certain conditions are met, in shares of the Company’s common stock at a price per share equal to the last reported sale price on the trading day immediately prior to the interest payment date.

The 2024 convertible notes were convertible, at the option of the holder, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 333.3333 shares per $ 1,000 principal amount of 2024 convertible notes, which is equal to a conversion price of approximately $ 3.00 per share.

In February 2021, the Company converted the $ 5.0 million 2024 convertible notes with the issuance of 1,666,667 shares of the Company’s common stock.

Amortization of debt discount and debt issuance cost related to all borrowings for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):

During the year ended December 31, 2021 , Mann Group converted $ 0.4 million of interest and $ 9.6 million of principal into 4,000,000 shares of common stock.

Amortization of debt discount and debt issuance cost related to all borrowings for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Amortization of debt discount

Amortization of debt issuance cost

Milestone Rights — As of September 30, 2021 and December 31, 2020, the remaining Milestone Rights liability balance was $ 5.9 million and $ 7.3 million, respectively, which was based on initial fair value estimates calculated using the income approach and reduced by milestone achievement payments made.

During the first quarter of 2021, the Company achieved the second Afrezza net sales milestone specified by the Milestone Rights.

The milestone carrying value of the Milestone Rights liability related to the $ 5.0 million payment, which was made in the second quarter of 2021, was approximately $ 1.3 million, which represented the fair value as determined in 2013 (the most recent measurement date).

The agreement with the Milestone Purchasers that provides for the Milestone Rights includes customary representations and warranties and covenants by the Company, including restrictions on transfers of intellectual property related to Afrezza.

Milestone Rights — As of March 31, 2022 and December 31, 2021, the remaining Milestone Rights liability balance was $ 5.9 million, which was based on initial fair value estimates calculated using the income approach and reduced by milestone achievement payments made.

For each period, the $ 5.9 million liability consisted of a $ 1.1 million current liability which was presented as accrued expenses and other current liabilities and a $ 4.8 million long-term liability which was presented as milestone rights liability in our condensed consolidated balance sheets.

The Milestone Rights Agreement includes customary representations and warranties and covenants by the Company, including restrictions on transfers of intellectual property related to Afrezza.

The Milestone Rights are subject to acceleration in the event the Company transfers its intellectual property related to Afrezza in violation of the terms of such agreement.

Collaboration, Licensing and Other Arrangements

Revenue from collaborations and services for the three and nine months ended September 30, 2021 and 2020 are as follows (in thousands):

Revenue from collaborations and services for the three months ended March 31, 2022 and 2021 are as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

UT License Agreement (1)

Vertice Pharma Co-Promotion Agreement

UT CSA Agreement (2)

Cipla License and Distribution Agreement

UT Research Agreement

Vertice Pharma Co-Promotion Agreement

Total revenue from collaborations and services

United Therapeutics License Agreement — In September 2018, the Company and UT entered into an exclusive global license and collaboration agreement (the “UT License Agreement”) for the rights to the Company’s dry powder formulation of treprostinil (“Tyvaso DPI”) and associated inhalation delivery devices.

Under the UT License Agreement, UT is responsible for global development, regulatory and commercial activities with respect to Tyvaso DPI.

_________________________

Amounts consist of revenue recognized for Next-Gen R&D Services for the three months ended March 31, 2022 and R&D Services and License for the three months ended March 31, 2021 .

Amount consists of revenue recognized for Manufacturing Services for the three months ended March 31, 2022 .

United Therapeutics License Agreement — In September 2018, the Company and UT entered into an exclusive global license and collaboration agreement (the “UT License Agreement”), pursuant to which UT is responsible for global development, regulatory and commercial activities with respect to Tyvaso DPI.

The Company is responsible for manufacturing clinical supplies and commercial supplies of Tyvaso DPI.

3 unchanged sentences

Each such optioned product would be subject to UT’s payment to the Company of up to $ 40.0 million in additional option exercise and development milestone payments, as well as a low double-digit royalty on net sales of any such product.

At the inception of the agreement, the Company identified one distinct, performance obligation.

The Company determined that the key deliverables include the license, supply of product to be used in clinical development, and certain research services upon achievement of specified development targets (“R&D Services”).

Due to the specialized and unique nature of these services and their direct relationship with the license, the Company has determined that these deliverables represent one distinct bundle and thus, one performance obligation.

The Company also determined that UT’s option to expand the scope of the products to include products with other active ingredients is not a material right, and thus, not a performance obligation at the onset of the agreement.

The consideration for the option will be accounted for upon exercise of the option.

The Company expected to complete the activities specified in the initial development plan and to achieve the milestone events (including a $ 2.7 million increase in total consideration pursuant to the agreement executed in December 2020) by December 31, 2021 for total consideration of approximately $ 105.8 million, which included an upfront payment, four milestone payments, various pass-through costs and payments for clinical supplies.

Revenue was allocated as follows:

Distinct Performance Obligation

Transaction Price

Allocation of Price

Recognition Method

Progress Measure

Recognition Period

(in millions)

R&D Services and License

Sep 2018 - Dec 2021

___________________

Recognition period represents the estimated period to satisfy the performance obligation.

In May 2021, UT and the Company updated the development plan under the UT License Agreement to provide for additional process-development and stability-testing activities as well as the expansion of the Company’s commercial manufacturing capacity.

The activities and deliverables under the current development plan resulted in four distinct performance obligations which include:

(1) the continued development and approval process for a new drug application (“NDA”) (“R&D Services”);

(2) certain pre-commercial services in preparation for commercial launch of Tyvaso DPI “(Pre-Commercial Services”);

(3) development activities for the next generation of Tyvaso DPI (“Next-Gen R&D Services”);

and (4) certain design and construction activities in anticipation of expansion of the Company’s commercial manufacturing facility (“Facility Expansion Services”).

T he total consideration for the updated development plan of $ 50.2 million was allocated to the four distinct performance obligations based on management’s assessment of the stand-alone selling price of each performance obligation.

Consideration of $ 0.7 million for additional clinical supplies was added in June 2021 for a total of $ 50.9 million .

Revenue was allocated as follows:

Transaction Price

Allocation of Price (1)

Recognition Method

Progress Measure

(in millions)

Total transaction price

Distinct Performance Obligation

R&D Services and License

May 2021 - Oct 2021

Pre-Commercial Services

% of completion of costs

Next-Gen R&D Services

% of completion of costs

Facility Expansion Services (4)

Point in time

Transfer of control

___________________

Allocation is based on management’s assessment of the stand-alone selling price of each performance obligation.

Represents the estimated period when the R&D Services performance obligation will be substantially complete.

Pre-Commercial Services and Next-Gen R&D Services performance obligations will be satisfied over time using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract.

Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

The Company will also be acting as agent for the procurement of equipment for the manufacturing expansion for the UT Equipment.

The $ 5.3 million received from UT for the UT Equipment was recognized as deposits from customer on the condensed consolidated balance sheet and will be released as the title is transferred to UT .

The Facility Expansion Services performance obligation would be recognized as control of manufactured products is transferred to the customer.

On August 12, 2021, the Company and United Therapeutics entered into a commercial supply agreement (the “CSA”), pursuant to which the Company is responsible for manufacturing and supplying to United Therapeutics, and United Therapeutics is responsible for purchasing from the Company on a cost-plus basis, Tyvaso DPI and BluHale inhalation profiling devices, as required for commercial distribution and sale by United Therapeutics.

In August 2021, the Company and United Therapeutics entered into a CSA, pursuant to which the Company is responsible for manufacturing and supplying to United Therapeutics, and United Therapeutics is responsible for purchasing from the Company on a cost-plus basis, Tyvaso DPI and BluHale inhalation profiling devices, as required for commercial distribution and sale by United Therapeutics.

In addition, United Therapeutics is responsible for supplying treprostinil at its expense in quantities necessary to enable the Company to manufacture Tyvaso DPI as required by the CSA.

The activities and deliverables under CSA and the current development plan resulted in three distinct performance obligations which include:

Also pursuant to the CSA, UT will remit a reimbursement of certain pre-production costs incurred by the Company to support the manufacturing and supply of Tyvaso DPI.

The activities and deliverables under the CSA and the current development plan resulted in three distinct performance obligations which include:

(1) the license, supply of product to be used in clinical development, and continued development and approval support for Tyvaso DPI (“R&D Services and License”);

(2) development activities for the next generation of Tyvaso DPI (“Next-Gen R&D Services”);

(2) development activities for the next generation of Next-Gen R&D Services;

and (3) a material right associated with future commercial manufacturing and supply of product (“Manufacturing Services”).

The total revised anticipated cash flows of $ 221.5 million from the transaction was allocated to the three distinct performance obligations as follows.

Anticipated Cash Flow

Allocation (1)

As amended in October 2021, the term of the CSA continues until December 31, 2031 (unless earlier terminated) and is thereafter renewed automatically for additional, successive two-year terms unless (i) United Therapeutics provides notice to the Company at least 24 months in advance of such renewal that United Therapeutics does not wish to renew the CSA or (ii) the Company provides notice to United Therapeutics at least 48 months in advance of such renewal that the Company does not wish to renew the CSA.

The Company and United Therapeutics each have normal and customary termination rights, including termination for material breach that is not cured within a specific timeframe or in the event of liquidation, bankruptcy or insolvency of the other party.

The Company accounted for the contract modification as if it were part of the existing contract since the amendment modified the scope and price of the CSA by extending the term and increasing the occupancy rate.

The effect of the modification on the transaction price and on the measure of progress is recognized as an adjustment to revenue as of the date of the modification.

The modification did not result in a change the activities and deliverables under the CSA.

Revenue Allocation (1)

Recognition Method

12 unchanged sentences

Allocation is based on management’s assessment of the stand-alone selling price of each performance obligation.

The total anticipated cash flow includes a transaction price of $ 64.3 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $ 399.2 million for future supply of Tyvaso DPI over the remaining term of the CSA.

The license for the Company’s IP was considered to be interdependent with the development activities to support approval of Tyvaso DPI.

1 unchanged sentence

therefore, the royalties associated with the license are excluded from the determination of the transaction price and the Company will recognize revenue as the sale of Tyvaso DPI to a patient occurs.

Represents the estimated period when the R&D Services performance obligation will be substantially complete.

Represents the period when the revenue for the R&D Services performance obligation was recognized.

The standalone selling price (“SSP”) for the Next-Gen R&D Services performance obligation was based on industry ratios as well as the Company’s historical R&D projects.

The transaction price for the Next-Gen R&D Services was based on fixed consideration which was allocated between performance obligations as discussed in note (2) above.

The Next-Gen R&D Services performance obligation will be satisfied over time using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract.

Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

The Manufacturing Services performance obligation will be recognized as control of manufactured products is transferred to the customer;

therefore, no revenue associated with this obligation was recognized during the three or nine months ended September 30, 2021.

The allocation of transaction price is based on the Company’s estimated production and the ultimate cash flows may vary as manufacturing purchase orders are received.

As of September 30, 2021, deferred revenue consisted of $ 13.8 million, which was classified as current on the condensed consolidated balance sheet.

As amended by an amendment dated October 16, 2021, the term of the CSA continues until December 31, 2031 (unless earlier terminated) and is thereafter renewed automatically for additional, successive two-year terms unless (i) United Therapeutics provides notice to the Company at least 24 months in advance of such renewal that United Therapeutics does not wish to renew the CSA or (ii) the Company provides notice to United Therapeutics at least 48 months in advance of such renewal that the Company does not wish to renew the CSA .

Pre-production activities under the CSA, such as facility expansion services and certain other administrative services, were considered bundled services that are part of the Company’s Manufacturing Services performance obligation, given the nature of the Company’s contractual responsibilities and ASC 606 requirements.

The Manufacturing Services performance obligation will be recognized as control of manufactured products is transferred to UT.

The modification did not result in a cumulative catch-up adjustment as a result of the revenue being deferred for the performance obligations that were affected by the modification.

The allocation of transaction price includes a material right related to manufacturing services in the amount of $ 144.5 million .

The total anticipated cash flow is based on the Company’s estimated production and the ultimate cash flows may vary as manufacturing purchase orders are received.

As of March 31, 2022, deferred revenue consisted of $ 25.7 million, of which $ 1.1 million was classified as current and $ 24.6 million was classified as long-term on the condensed consolidated balance sheet.

Vertice Pharma Co-Promotion Agreement — In December 2020, the Company entered into a co-promotion agreement with Vertice Pharma where the Company’s sales force will promote Thyquidity to adult endocrinologists, pediatric endocrinologists and other healthcare providers who treat hypothyroidism.

1 unchanged sentence

Vertice Pharma launched Thyquidity in collaboration with the Company in February 2021.

At inception of the agreement, the Company identified a single performance obligation that the Company will satisfy over time.

The Company estimates the total transaction price is approximately $ 6.3 million, consisting of fixed consideration and the unconstrained amount of estimated variable consideration, which is based on gross profit applied to defined revenue benchmarks.

The amount of variable consideration is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur and the payments will be received.

At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

The total transaction price will be recognized over a two-year period.

the period over which the Company is required to satisfy its performance obligation, using the input method based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract.

Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

In July 2021, the Company and Vertice Pharma entered into an amendment to the Vertice Pharma Co-Promotion Agreement that modifies the terms of payment where 50 % of the previously fixed consideration will be subject to certain promotional conditions, resulting in variable consideration.

In September 2021, the Company and Vertice Pharma mutually agreed that the Company would cease promotional activities under the co-promotion agreement effective September 30, 2021, other than certain transitional activities that continued until October 15, 2021.

The Company and Vertice Pharma are currently negotiating a final settlement of all obligations related to the termination of the co-promotion agreement.

As of September 30, 2021, the Company fully reserved $ 0.8 million of revenue from the co-promotion of Thyquidity, which was recognized as allowance for doubtful accounts – collaborations and services, which is included in accounts receivable, net in the consolidated balance sheet.

In addition, the Company recognized an impairment on contract assets of $ 0.1 million related to variable consideration from gross profits which was recognized during the nine months ended September 30, 2021.

There was no variable consideration from gross profits recognized during the three months ended September 30, 2021.

As of March 31, 2022, the Company fully reserved $ 0.8 million of revenue from the co-promotion of Thyquidity, which was recognized as allowance for credit losses – collaborations and services, which is included in accounts receivable, net in the condensed consolidated balance sheet.

Thirona Collaboration Agreement — In June 2021, the Company and Thirona entered into a collaboration agreement to evaluate the therapeutic potential of Thirona’s compound for the treatment of pulmonary fibrosis.

1 unchanged sentence

The parties will perform their respective obligations and provide reasonable support for research, clinical development and regulatory strategy.

The collaboration agreement will be accounted for under ASC 808, Collaborative Agreements;

collaboration agreement will be accounted for under ASC 808, Collaborative Agreements;

however, no consideration will be exchanged between the parties .

The Company will expense the costs incurred as cost of revenue — collaborations and services in the condensed consolidated statements of operations.

The Company will expense the costs incurred as research and development in the condensed consolidated statements of operations.

Biomm Supply and Distribution Agreement — In May 2017, the Company and Biomm entered into a supply and distribution agreement for the commercialization of Afrezza in Brazil.

Under this agreement, Biomm was responsible for pursuing regulatory approvals of Afrezza in Brazil, including from the Agência Nacional de Vigilância Sanitária (“ANVISA”) and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos (“CMED”), both of which have now been received.

Biomm commenced product sales in January 2020.

In September 2019, the Company delivered its first shipment of Afrezza to Biomm and recorded it as net revenue — commercial product sales for $ 0.7 million, in advance of the planned launch of the product in Brazil by Biomm.

During the second quarter of

2020, t he Company sold $ 0.2 million of product to Biomm .

No additional s hipments were made to Biomm in 2020 or the first nine months of 2021 .

There were no shipments of product to Biomm in 2021 or the first quarter of 2022.

Cipla License and Distribution Agreement — In May 2018 , the Company and Cipla Ltd.

(“Cipla”) entered into an exclusive agreement for the marketing and distribution of Afrezza in India and the Company received a $ 2.2 million nonrefundable license fee.

Under the terms of the agreement, Cipla will be responsible for obtaining regulatory approvals to distribute Afrezza in India and for all marketing and sales activities of Afrezza in India.

Under the terms of the agreement, Cipla is responsible for obtaining regulatory approvals to distribute Afrezza in India and for all marketing and sales activities of Afrezza in India.

The Company is responsible for supplying Afrezza to Cipla.

2 unchanged sentences

The additional milestone payments represent variable consideration for which the Company has not recognized any revenue because of the uncertainty of obtaining marketing approval.

As of September 30, 2021, the deferred revenue balance was $ 1.7 million, of which $ 0.1 million is classified as current and $ 1.6 million is classified as long term in the condensed consolidated balance sheets.

AMSL Distribution Agreement — In May 2019, the Company entered into an exclusive marketing and distribution agreement with Australasian Medical & Scientific Ltd.

(“AMSL”) for the commercialization of Afrezza in Australia.

Under the terms of this agreement, AMSL is responsible for obtaining regulatory and reimbursement approvals to distribute Afrezza in Australia.

On August 1, 2021, Dexcom, Inc.

acquired all of the outstanding shares of AMSL As a result, on November 4, 2021, the Company exercised its right under the marketing and distribution agreement to terminate such agreement on ten days’ written notice.

As of March 31, 2022, the deferred revenue balance was $ 1.6 million, of which $ 0.1 million is classified as current and $ 1.5 million is classified as long term in the condensed consolidated balance sheets.

Fair Value of Financial Instruments

4 unchanged sentences

The Company uses the exit price method for estimating the fair value of loans for disclosure purposes.

Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 — Significant inputs to the valuation model are unobservable.

The carrying amounts reported in the condensed consolidated financial statements for cash, accounts receivable, accounts payable, and accrued expenses and other current liabilities (excluding the Milestone Rights liability) approximate their fair value due to their relatively short maturities.

The fair value of the cash equivalents, MidCap credit facility, Mann Group promissory notes, 2024 convertible notes, Senior convertible notes and Milestone Rights liabilities are disclosed below.

The fair value of the cash equivalents, long- and short-term investments, MidCap credit facility, Mann Group promissory notes, 2024 convertible notes, Senior convertible notes, Milestone Rights liabilities and Financing liability are disclosed below.

Cash Equivalents and Restricted Cash — Cash equivalents consist of highly liquid investments with original or remaining maturities of 90 days or less at the time of purchase that are readily convertible into cash.

As of September 30, 2021 and December 31, 2020, the Company held $ 51.7 million and $ 67.0 million, respectively, of cash and cash equivalents.

As of December 31, 2020, the Company held $ 0.2 million in restricted cash, which was comprised of money market funds for the collateralization of a letter of credit.

The fair value of these money market funds was determined by using quoted prices for identical investments in an active market (Level 1 in the fair value hierarchy).

There was no restricted cash as of September 30, 2021.

Investments — Investments consist of highly liquid investments that are intended to facilitate liquidity and capital preservation.

The fair value of investments approximates their carrying value.

The measurement of which is based on a market approach using quoted market values (Level 1 in the fair value hierarchy).

As of September 30, 2021, the Company held $ 87.3 million of short-term investments and $ 42.1 million of long-term investments.

As of March 31, 2022 and December 31, 2021, the Company held $ 67.2 million and $ 124.2 million, respectively, of cash and cash equivalents.

Financial Liabilities — The following tables set forth the fair value of the Company’s financial instruments (Level 3 in the fair value hierarchy) (in millions):

September 30, 2021

March 31, 2022

Carrying Value

10 unchanged sentences

A change in yield of + or – 2 % would result in a fair value of $ 39.0 million and $ 42.4 million, respectively.

The April 2021 amendment to the Mann Group convertible note resulted in a substantial premium of $ 22.1 million based on the fair value post modification which was recognized as additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2021.

The accounting for the $ 22.1 million loss on extinguishment did not result in a change in the financial position of the Company.

The fair value assessed as of September 30, 2021 was determined by applying a discounted cash flow analysis with a hypothetical yield of 12 % and volatility of 95 % to the straight note and a binomial option pricing model for the value of the conversion feature.

The fair value assessed as of March 31, 2022 was determined by applying a discounted cash flow analysis with a hypothetical yield of 12 % and volatility of 84.2 % to the straight note and a binomial option pricing model for the value of the conversion feature.

A change in yield of + or – 2 % would result in a fair value of $ 32.8 million and $ 34.6 million, respectively.

4 unchanged sentences

Financial liabilities:

Senior convertible notes (1)

MidCap credit facility (2)

Mann Group promissory notes (2)

2024 convertible notes

Mann Group convertible notes (3)

Milestone rights (4)

_________________________

Fair value measurements were based on a discounted cash flow model, except for the Milestone rights for which a Monte Carlo simulation was applied.

Mann Group promissory notes consisted of the following carrying values and fair values:

Mann Group convertible notes carrying value of $ 28.0 million and fair value of $ 52.2 million.

Mann Group non-convertible notes carrying value of $ 35.1 million and fair value of $ 26.7 million.

Fair value determined by applying a discounted cash flow analysis to the straight note with a hypothetical yield of 12 %, volatility of 90 % and a Monte Carlo simulation for the value of the conversion feature.

A change in yield of + or – 2 % would result in a fair value of $ 226.6 million and $ 249.4 million, respectively .

Fair value determined by applying a discounted cash flow analysis with a hypothetical yield of 10 %.

A change in yield of + or – 2 % would result in a fair value of $ 39.1 million and $ 42.7 million, respectively.

The accounting for the $ 22.1 million loss on extinguishment did not result in a change in the financial position of the Company.

The fair value assessed as of December 31, 2021 was determined by applying a discounted cash flow analysis with a hypothetical yield of 12 % and volatility of 85 % to the straight note and a binomial option pricing model for the value of the conversion feature.

A change in yield of + or – 2 % would result in a fair value of $ 36.9 million and $ 38.8 million, respectively.

Fair value determined by applying a Monte Carlo simulation.

Milestone Rights Liability — The fair value measurement of the Milestone Rights liability is sensitive to the discount rate and the timing of achievement of milestones.

The Company utilized Monte-Carlo Simulation Method to simulate the Net Sales under a neutral framework to estimate the payment.

The Company utilized Monte-Carlo Simulation Method to simulate the Afrezza net sales under a neutral framework to estimate the payment.

The Company then discounted the future expected payments at cost of debt with a term equal to the simulated time to payout based on cumulative sales.

Financing Liability — The Sale-Leaseback Transaction in November 2021 resulted in a financing liability which is included in our condensed consolidated balance sheets as a current financing liability of $ 9.4 million and a long-term financing liability of $ 93.5 million.

The Company determined the fair value of the financing liability using level 3 inputs.

As of March 31, 2021, the fair value was determined using a discounted cash flow analysis with a hypothetical yield of 9.0 %.

As of December 31, 2021, the Company evaluated the fair value of its financing liability and determined that the fair value approximated the carrying value .

Common and Preferred Stock

1 unchanged sentence

No other class of capital stock is authorized.

As of September 30, 2021 and December 31, 2020, 250,245,831 and 242,117,089 shares of common stock, respectively, were issued and outstanding and no shares of preferred stock were outstanding.

As of March 31, 2022 and December 31, 2021, 252,413,434 and 251,477,562 shares of common stock, respectively, were issued and outstanding and no shares of preferred stock were outstanding.

In February 2018 , the Company entered into a controlled equity offering sales agreement (the “CF Sales Agreement”) with Cantor Fitzgerald & Co.

1 unchanged sentence

Under the Sales Agreement, Cantor Fitzgerald may sell shares by any method deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of 1933, as amended.

For the nine months ended September 30, 2021, the Company sold an aggregate of 578,063 shares of the Company’s common stock at a weighted average purchase price of $ 3.26 per share for an aggregate gross proceeds of approximately $ 1.9 million pursuant to the Sales Agreement.

For the nine months ended September 30, 2020, the Company sold an aggregate of 9,401,827 shares of the Company’s common stock at a

weighted average purchase price of $ 1.66 per share for an aggregate gross proceeds of approximately $ 15.6 million pursuant to the CF Sales Agreement.

For the three months ended March 31, 2022, there were no sales under the CF Sales Agreement.

For the three months ended March 31, 2021, the Company sold an aggregate of 578,063 shares of the Company’s common stock at a weighted average purchase price of $ 3.26 per share for an aggregate gross proceeds of approximately $ 1.9 million pursuant to the CF Sales Agreement.

In the first quarter of 2021, Mann Group converted $ 0.4 million of interest and $ 9.6 million of principal into 4,000,000 shares of common stock in accordance with the terms of the Mann Group convertible note.

See Note 6 – Borrowings .

In February 2021, the Company converted $ 5.0 million principal amount of 2024 convertible notes into 1,666,667 shares of the Company’s common stock in accordance with the terms of the 2024 convertible notes.

See Note 6 – Borrowings .

For the nine months ended September 30, 2021, the Company received $ 0.1 million from the market price stock purchase plan (“MPSPP”) for 25,000 shares and a de minimis amount for the nine months ended September 30, 2020.

There were no MPSPP transactions during the three months ended September 30, 2021 and 2020.

Subsequent to September 30, 2021, MidCap exercised all outstanding warrants to purchase 1,283,467 shares of the Company’s common stock through a cashless exercise that resulted in the net issuance of 964,113 shares.

See Note 6 – Borrowings .

In the first quarter of 2021, the Company converted $ 5.0 million principal amount of 2024 convertible notes into 1,666,667 shares of the Company’s common stock in accordance with the terms of the 2024 convertible notes.

For the three months ended March 31, 2022, the Company received $ 0.7 million from the market price stock purchase plan (“MPSPP”) for 252,176 shares.

There were no MPSPP transactions during the three months ended March 31, 2021.

The Company issued 233,401 and 292,981 shares of common stock pursuant to the ESPP for the three months ended March 31, 2022 and 2021, respectively.

There were approximately 0.9 million shares of common stock available for issuance under the ESPP as of March 31, 2022.

Earnings per Common Share (“EPS”)

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

EPS — basic and diluted:

4 unchanged sentences

Potentially dilutive securities outstanding that are considered antidilutive are summarized as follows (in shares):

Nine Months Ended

September 30,

Three Months Ended

Senior convertible notes

Mann Group convertible notes

Warrants associated with MidCap credit facility

Common stock options and PNQs

1 unchanged sentence

Employee stock purchase plan

2024 convertible notes

Common stock warrants

Warrants associated with MidCap credit facility

____________________

Market RSUs are included at the maximum share delivery percentage.

Market RSUs issued in 2020 are included at the maximum share delivery of 300 % and the Market RSUs issued in 2021 are included at 0 % in accordance with a valuation assessment obtained as of March 31, 2022.

Stock-Based Compensation Expense

During the nine months ended September 30, 2021, the Company granted the following awards:

Three Months Ended

During the three months ended March 31, 2022, the Company granted the following awards:

Three Months Ended

Nine Months Ended

September 30,

Employee awards:

Non-employee director RSUs

____________________

RSUs had a weighted average grant date fair value of $ 5.53 per share, of which 202,237 RSUs had a vesting period of 1 year and 167,900 RSUs had a vesting period of four years .

RSUs had a weighted average grant date fair value of $ 4.26 per share and a vesting period of 4 years.

Market RSUs had a grant date fair value of $ 9.30 per share and will vest on May 17, 2024 provided the closing price of the Company’s common stock on such vesting date is not less than the closing price on May 17, 2021.

The number of shares delivered on the vesting date is determined by the percentile ranking of MannKind total shareholder return (TSR) over the period from May 18, 2021 until May 17, 2024 relative to the TSR of the Russell 3000 Pharmaceutical & Biotechnology Index over the same three-year period, as follows:

less than 25th percentile= 0 % of target, 25th percentile= 50 % of target, 50th percentile= 100 % of target, 75th percentile= 200 % of target, 90th percentile or higher= 300 % maximum.

Payout values will be interpolated between the percentile rankings above.

RSUs had a weighted average grant date fair value of $ 4.31 per share and vested immediately upon grant, but the underlying shares of common stock will not be delivered until there is a separation of service, such as resignation, retirement or death.

RSUs had a weighted average grant date fair value of $ 3.97 per share and a vesting period of 4 years.

As of September 30, 2021, there was $ 0.3 million of unrecognized stock-based compensation expense related to options and PNQs, which is expected to be recognized over a weighted average period of approximately 1.72 years, and $ 11.6 million and $ 11.2 million of unrecognized stock-based compensation expense related to RSUs and Market RSUs, respectively, which is expected to be recognized over a weighted average period of approximately 3.19 and 2.31 years, respectively.

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 was as follows (in thousands):

RSUs had a weighted average grant date fair value of $ 2.72 per share, of which 12,800 RSUs had a cliff vesting period of three years and 75,615 RSUs had a vesting period of four years .

As of March 31, 2022, there was $ 1.5 million of unrecognized stock-based compensation expense related to options and PNQs, which is expected to be recognized over a weighted average period of approximately 1.20 years, and $ 9.4 million and $ 8.6 million of unrecognized stock-based compensation expense related to RSUs and Market RSUs, respectively, which is expected to be recognized over a weighted average period of approximately 2.86 and 1.84 years, respectively.

Total stock-based compensation expense recognized in the condensed consolidated statements of operations as cost of goods sold, cost of revenue – collaborations and services, research and development and selling, general and administrative expense for the three months ended March 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

RSUs and options

6 unchanged sentences

The executives’ rights under the ESPP are identical to those of all other employees.

The Company issued 527,049 and 626,818 shares of common stock pursuant to the ESPP for the nine months ended September 30, 2021 and 2020, respectively.

There were approximately 1.1 million shares of common stock available for issuance under the ESPP as of September 30, 2021.

The Company issued 233,401 and 292,981 shares of common stock pursuant to the ESPP for the three months ended March 31, 2022 and 2021, respectively.

There were approximately 0.9 million shares of common stock available for issuance under the ESPP as of March 31, 2022.

Commitments and Contingencies

3 unchanged sentences

The maximum amount of potential future indemnification is unlimited;

however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future

amounts paid.

however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid.

The Company believes the fair value of these indemnification agreements is minimal.

3 unchanged sentences

Litigation — The Company is subject to legal proceedings and claims which arise in the ordinary course of its business.

As of September 30, 2021, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company and no accrual has been recorded.

The Company maintains liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and normal business operations.

As of March 31, 2022, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company and no accrual has been recorded.

The Company maintains liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and

normal business operations.

The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

The Company’s policy is to accrue for legal expenses in connection with legal proceedings and claims as they are incurred.

Contingencies — In July 2013, the Company entered into an agreement with the Milestone Purchasers, pursuant to which the Company granted the Milestone Rights to receive payments 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 6 – Borrowings ).

Contingencies — In July 2013, the Company entered into the Milestone Rights Agreement with the Original Milestone Purchasers, pursuant to which the Company granted the Milestone Rights to receive payments up to $ 90.0 million upon the occurrence of specified strategic and sales milestones, $ 65.0 million of which remains payable to the Milestone Purchasers upon achievement of such milestones (see Note 7 – Borrowings ).

The fair value of the Milestone Rights is recorded in the condensed consolidated balance sheet, including $ 1.1 million in accrued expenses and other current liabilities and $ 4.8 million in milestone rights liability.

Sale-Leaseback Transaction — On November 8, 2021, the Company sold the Property to the Purchaser for a sales price of $ 102.3 million, subject to terms and the conditions contained in a purchase and sale agreement.

Effective with the closing of the Sale-Leaseback Transaction, the Company and the Purchaser entered into a lease agreement (the “Lease”), pursuant to which the Company leased the Property from the Purchaser for an initial term of 20 years, with four renewal options of five years each.

The total annual rent under the Lease starts at approximately $ 9.5 million per year, subject to a 50% rent abatement during the first year of the Lease, and will increase annually by (i) 2.5% in the second through fifth year of the Lease and (ii) 3% in the sixth and each subsequent year of the Lease, including any renewal term.

The Company is responsible for payment of operating expenses, property taxes and insurance for the Property.

The Purchaser will hold a security deposit of $ 2.0 million during the Lease term.

Pursuant to the terms of the Lease, the Company has four options to repurchase the Property, in 2026, 2031, 2036 and 2041, for the greater of (i) $ 102.3 million and (ii) the fair market value of the Property.

Effective with the closing of the Sale-Leaseback Transaction, the Company and the Purchaser also entered into a right of first refusal agreement (the “ROFR”), pursuant to which the Company has a right to re-purchase the Property from the Purchaser in accordance with terms and conditions set forth in the ROFR.

Specifically, if the Purchaser receives, and is willing to accept, a bona fide purchase offer for the Property from a third-party purchaser, the Company has certain rights of first refusal to purchase the Property on the same material terms as proposed in such bona fide purchase offer.

As of March 31, 2022, the related financing liability was $ 102.9 million, which was recognized in our condensed consolidated balance sheet as $ 93.5 million of financing liability — long-term and $ 9.4 million of financing liability — short-term.

As of December 31, 2021, the related financing liability was $ 100.5 million, which was recognized in our condensed consolidated balance sheet as $ 93.5 million of financing liability — long-term and $ 7.0 million of financing liability — short-term.

Financing liability information is as follows (in thousands):

March 31, 2022

December 31, 2021

Weighted average remaining lease term (in years)

Weighted average discount rate

Three Months Ended

Interest expense on financing liability

Financing liability payments as of March 31, 2022 was as follows (in thousands):

March 31, 2022

December 31, 2021

Interest expense

Debt issuance costs

Total financing liability

_________________________

2022 includes amortization of the rent abatement.

Commitments — In July 2014, the Company entered into the Insulin Supply Agreement with Amphastar pursuant to which Amphastar manufactures for and supplies to the Company certain quantities of recombinant human insulin for use in Afrezza.

Under the terms of the Insulin Supply Agreement, Amphastar is responsible for manufacturing the insulin in accordance with the Company’s specifications and agreed-upon quality standards.

In May 2021, the Company and Amphastar amended the Insulin Supply Agreement to extend the term and restructure the annual purchase commitments.

In connection with the amendment, the Company agreed to pay $ 2.0 million of amendment fees, which were recognized in cost of goods sold for the nine months ended September 30, 2021.

The remaining purchase commitments as of September 30, 2021 and March 31, 2021 (pre-amendment) were as follows:

September 30, 2021

In May 2021, the Company and Amphastar France Pharmaceuticals S.A.S.

(“Amphastar”) amended the Insulin Supply Agreement to extend the term and restructure the annual purchase commitments.

In connection with the amendment, the Company agreed to pay $ 2.0 million of amendment fees, which were recognized in cost of goods sold for the year ended December 31, 2021.

The remaining purchase commitments as of March 31, 2022 and March 31, 2021 (pre-amendment) were as follows:

March 31, 2022

March 31, 2021

Pursuant to the amendment, the term of the Insulin Supply Agreement expires on December 31, 2027 , unless terminated earlier, and can be renewed for additional, successive two-year terms upon 12 months’ written notice given prior to the end of the initial term or any additional two-year term.

1 unchanged sentence

In addition, the Company may terminate the Insulin Supply Agreement upon two years’ prior written notice to Amphastar without cause or upon 30 days’ prior written notice to Amphastar if a controlling regulatory authority withdraws approval for Afrezza, provided, however, in the event of a termination pursuant to either of the latter two scenarios, the provisions of the Insulin Supply Agreement require the Company to pay the full amount of all unpaid purchase commitments due over the initial term within 60 calendar days of the effective date of such termination.

Warrants – In August 2019, in connection with the MidCap credit facility, the Company issued warrants to purchase an aggregate of 1,171,614 shares of the Company’s common stock, at an exercise price equal to $ 1.11 per share, to the lenders.

On November 30, 2020, in connection with the third amendment to the MidCap credit facility, the Company issued warrants to purchase an aggregate of 111,853 shares of the Company’s common stock, at an exercise price of $ 2.91 per share.

Subsequent to September 30, 2021, MidCap exercised all outstanding warrants (see Note 6 – Borrowings ).

Vehicle Leases – During the second quarter of 2018, the Company entered into a master lease agreement with Enterprise Fleet Management Inc.

During the nine months ended September 30, 2021, 50 vehicles were retired and 37 of those vehicles were replaced, resulting in a fleet size of 76 vehicles.

No gain or loss was recorded.

The revised monthly payment inclusive of maintenance fees, insurance and taxes is approximately $ 0.1 million and the additional right of use asset and lease obligation is approximately $ 0.5 million in the consolidated balance sheets.

During 2021, 85 vehicles were retired and replaced, resulting in a fleet size of 89 vehicles.

The Company received proceeds for the gain on the retired vehicles residual value in the amount of $ 0.5 million, which is included as a reduction to our lease expense.

The lease expense is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Office Leases — In May 2017, the Company executed an office lease with Russell Ranch Road II LLC for the Company’s corporate headquarters in Westlake Village, California.

Office Leases — In May 2017, the Company executed an office lease with Russell Ranch Road II LLC for the Company’s corporate offices in Westlake Village, California.

The office lease commenced in August 2017.

1 unchanged sentence

The lease also provides for allowances for tenant alterations and maintenance.

The lease expires in January 2023 and provides the Company with a five-year renewal option.

The lease expense is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

In November 2017, the Company executed an office lease with Russell Ranch Road II LLC to expand the office space for the Company’s corporate headquarters in Westlake Village, California.

In November 2017, the Company executed an office lease with Russell Ranch Road II LLC to expand the office space for the Company’s corporate offices in Westlake Village, California.

The office lease commenced in October 2018.

1 unchanged sentence

In addition, the Company received reimbursement from the landlord of $ 56,325 for tenant improvements and was not required to pay a first-year common area maintenance fee.

The lease expires in January 2023 and provides the Company with a five-year renewal option.

Subsequent to March 31, 2022, the Company renewed its office lease with Russell Ranch Road II LLC.

Pursuant to the renewal, the Company will pay initial monthly payments of $ 79,543 , subject to 3 % annual increases, plus the estimated cost of maintaining the property and common areas by the landlord.

The Company will receive a fourteen-month concession from the lease commencement period of February 2023 through March 2024.

The lease provides the Company with a 66 month renewal option.

Lease information is as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease costs

Variable lease costs

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Weighted average discount rate

Future minimum office and vehicle lease payments as of September 30, 2021 and December 31, 2020, are as follows (in thousands):

September 30, 2021

Future minimum office and vehicle lease payments as of March 31, 2022 and December 31, 2021, are as follows (in thousands):

March 31, 2022

December 31, 2021

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and concluded, in accordance with the applicable accounting standards, that net deferred tax assets should be fully reserved.

The Company has assessed its position with regards to uncertainty in tax positions and believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position.

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to this guidance.

The Company’s tax years since 2016 remain subject to examination by federal, state and foreign tax authorities.

Subsequent Event

Sale-Leaseback Transaction of our Manufacturing Facility —On November 8, 2021, the Company closed the Sale-Leaseback Transaction with a sales price of $ 102.3 million for the Property, which included the Company’s manufacturing facility (commonly known as Building 1) consisting of approximately 263,900 square feet, but did not include the Company’s adjacent research and development facility (commonly known as Building 8).

The Company is responsible for payment of operating expenses, property taxes and insurance for the Property.

The Purchaser will hold a security deposit of $ 2.0 million during the Lease term.

The Company has assessed its position with regards to uncertainty in tax positions and has not recognized a liability for unrecognized tax benefits.

The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

During the three months ended March 31, 2022 the Company did no t recognize any interest or penalties.

The Company’s tax years since 2017 remain subject to examination by tax authorities.

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 1. Financial Statements