What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-05 · 382 added, 204 removed, 744 unchanged (44% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 31, 2022

June 30, 2022

December 31, 2021

6 unchanged sentences

Property and equipment, net

Other intangible asset

Long-term investments

9 unchanged sentences

Midcap credit facility

Promissory notes

Mann Group convertible note

Accrued interest — promissory notes

3 unchanged sentences

Deferred revenue — long term

Milestone rights liability

Milestone liabilities

Deposits from customer

3 unchanged sentences

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

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

no shares issued or outstanding as of June 30, 2022 and December 31, 2021

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

257,276,847 and 251,477,562 shares issued and outstanding

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

at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Net revenue — commercial product sales

5 unchanged sentences

Selling, general and administrative

Gain on foreign currency translation

(Gain) loss on foreign currency translation

Loss on purchase commitments

Total expenses

4 unchanged sentences

Interest expense on notes

Loss on extinguishment of debt, net

Other expense

9 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive loss:

2 unchanged sentences

See notes to condensed consolidated financial statements.

MANNKIND CORPORATION AND SUBSIDIA RIES

MANNKIND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

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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

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BALANCE, MARCH 31, 2022

Issuance of common stock pursuant to

conversion of Mann Group

convertible note

Issuance of common stock pursuant to

conversion of the Mann Group

convertible note interest

Net issuance of common stock associated

with stock options and restricted stock

Stock-based compensation expense

Cumulative loss on available-for-sale

BALANCE, JUNE 30, 2022

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Interest expense on financing liability

Interest on milestone payment

Depreciation and amortization

2 unchanged sentences

Gain on foreign currency translation

Write-off of inventory

Loss on extinguishment of debt

Changes in operating assets and liabilities:

6 unchanged sentences

Recognized loss on purchase commitments

Accrued interest on Mann Group promissory notes

Customer deposits

1 unchanged sentence

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of debt securities

Proceeds from maturity of debt securities

Purchase of property and equipment

Purchase of debt securities

Acquisition of V-Go

Purchase of available-for-sale securities

Purchase of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment on financing liability

Proceeds from market price stock purchase plan

Payment of employment taxes related to vested restricted stock units

and exercise of stock options

Proceeds from the Senior convertible notes

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

Issuance costs associated with at-the-market offering

Payment of employment taxes related to vested restricted stock units

and exercise of stock options

Proceeds from market price stock purchase plan

Net cash provided by financing activities

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

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

Net cash (used in) provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

SUPPLEMENTAL CASH FLOWS DISCLOSURES:

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Reclassification of investments from long-term to current

Common stock issuance to settle employee stock purchase plan liability

Payments on debt and interest through common stock issuance

Modification of operating leases

Addition of right-of-use asset

UT owned property and equipment

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

Payment of interest on 2024 convertible notes through common stock issuance

Common stock issuance to settle employee stock purchase plan liability

Contingent milestone liability

Premium on Mann Group convertible note

See notes to condensed consolidated financial statements.

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

The results of operations for the three and six months ended June 30, 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.

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Management considers many factors in selecting appropriate financial accounting policies, and in developing the estimates and assumptions that are used in the preparation of the financial statements.

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

Management must apply significant judgment in this process.

In addition, the ongoing COVID-19 pandemic has increased the level of judgment used by management in developing these estimates and assumptions, particularly given that 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 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.

The Company’s lead product is Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, which was approved by the U.S.

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).

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.

Business — MannKind focuses on the development and commercialization of therapeutic products for patients with endocrine and orphan lung diseases.

The Company is currently commercializing Afrezza (insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin indicated to improve glycemic control in adults with diabetes, and the V-Go wearable insulin delivery device, which provides continuous subcutaneous infusion of insulin in adults that require insulin.

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

In May 2022, the Company’s partner, United Therapeutics Corporation (“United Therapeutics” or “UT”), received approval from the U.S.

Food and Drug Administration (“FDA”) for Tyvaso DPI (treprostinil) inhalation powder, which is indicated for the treatment of pulmonary arterial hypertension and for the treatment of pulmonary hypertension associated with interstitial lung disease.

UT began commercializing Tyvaso DPI in June 2022 and is obligated to pay the Company a royalty on net sales of the product.

The Company also receives a margin on supplies of Tyvaso DPI that it manufactures for UT.

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

The Company is not currently profitable and has rarely generated positive net cash flow from operations.

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 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 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 its diabetes products, and development of other product candidates in the Company’s pipeline.

As of June 30, 2022, the Company had capital resources of $ 35.5 million in cash and cash equivalents, $ 118.6 million in short-term investments, $ 32.6 million in long-term investments, an accumulated deficit of $ 3.2 billion and $ 278.8 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 March 31, 2022.

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 borrowed as of June 30, 2022.

The final $ 60.0 million tranche became available through June 30, 2022 after the Tyvaso DPI approval by the FDA.

The Company did not exercise its right to borrow the final tranche.

See Note 9 – Borrowings .

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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.

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:

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(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.

Revenue Recognition – Net Revenue – Commercial Product Sales – The Company sells its products to a limited number of wholesale distributors, specialty and retail pharmacies, and durable medical equipment suppliers (“DME”) in the U.S.

(collectively, its “Customers”).

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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 March 3 1 , 202 2 and, therefore, the transaction price was not reduced further during the three months ended March 31, 2022 .

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 June 30 , 202 2 and, therefore, the transaction price was not reduced further during the six months ended June 30 , 2022 .

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

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Adjustments to the returns reserve have been made in the past and may be necessary in the future based on revised estimates to the Company’s assumptions.

Provider Chargebacks and Discounts — Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company.

Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers.

Customers charge the Company for the difference between what they pay for products and the ultimate selling price to the qualified healthcare providers.

These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is recorded in accrued expenses and other current liabilities.

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Estimates around Medicaid have historically required significant judgment due to timing lags in receiving invoices for claims from states.

For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program.

The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.

For Afrezza, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program.

The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for products that have been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.

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.

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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 pay e rs.

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.

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 product s that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses and other current liabilities.

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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:

With respect to our significant collaboration and service agreement with UT that includes a long-term commercial supply agreement (as amended, the “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;

(2) development activities for the next generation of the product (“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.

Following the FDA’s approval of Tyvaso DPI, UT began issuing purchase orders for the supply of product, which represent distinct contracts and performance obligations under ASC 606.

Revenue is recognized for the supply of product at a point in time, once control is transferred to UT.

See Note 10 – Collaboration, Licensing and Other Arrangements.

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If the milestone is improbable at inception and subsequently deemed probable of achievement, such will be added to the transaction price, resulting in a cumulative adjustment to revenue.

If the milestone is achieved after the performance period has been completed and all performance obligations have been delivered, the Company will recognize the milestone payment as revenue in its entirety in the period the milestone was achieved.

If the milestone is achieved after the performance period has been completed and all performance

obligations have been delivered, the Company will recognize the milestone payment as revenue in its entirety in the period the milestone was achieved.

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

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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’s net revenue and cost of revenue and goods sold as shown on the condensed consolidated statement of operations is comprised of revenue generated from product sales, services and royalties as shown below (in thousands):

Three Months Ended

Six Months Ended

Net revenue (in thousands)

Product sales (1)

Royalties (3)

Total net revenue

_________________________

Amounts represent the sales of Afrezza and V-Go to wholesalers and specialty pharmacies and Tyvaso DPI to UT.

Amounts represent revenue generated from our collaboration arrangements, including Next-Gen R&D Services (as defined in Note 10) for UT as well as arrangements with other collaboration partners.

See Note 10 – Collaboration, Licensing and Other Arrangements .

Amounts represent royalties on UT’s net sales of Tyvaso DPI.

Three Months Ended

Six Months Ended

Cost of revenue and goods sold (in thousands)

Product sales

Total cost of revenue and goods sold

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

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The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as, or when, the performance obligations under the contract are satisfied.

At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of such development milestones 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, which would affect license, collaboration, other revenue, and earnings in the period of adjustment.

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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 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.

The Company presents amounts of restricted cash that will be available for use within 12 months of the reporting date as restricted cash in current assets.

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):

March 31, 2022

December 31, 2021

March 31, 2021

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash

Cash and Cash Equivalents — 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 June 30, 2022 and December 31, 2021, cash equivalents were comprised of money market funds, corporate bonds and commercial paper accounts with original maturities less than 90 days from the date of purchase.

Held-to-Maturity Investments — The Company’s investments generally consist of commercial paper, corporate notes or bonds and U.S.

Treasury securities.

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

As of June 30, 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.

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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.

Available-for-Sale Investment — In June 2021, the Company purchased a $ 3.0 million convertible promissory note (the “Thirona convertible note”) issued by Thirona Bio, Inc.

In January 2022, the Company purchased an additional $ 5.0 million convertible promissory note issued by Thirona.

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 accrues at a rate of 6 % per annum.

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

The Thirona convertible note is classified as an available-for-sale security and is included in other assets in the condensed consolidated balance sheet.

The Thirona convertible notes are general unsecured obligations of Thirona.

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.

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Cash and cash equivalents are held in high credit quality institutions.

Cash equivalents consist of interest-bearing money market accounts and U.S.

Cash equivalents consist of interest-bearing money market funds and U.S.

Treasury securities with maturities less than 90 days.

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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.

Pre-Launch Inventory — An improvement to the manufacturing process for the Company’s primary excipient, fumaryl diketopiperazine (“FDKP”) was demonstrated to be viable and management expects to realize an economic benefit in the future as a result of such process improvement.

result of such process improvement.

Accordingly, the Company is required to assess whether to capitalize inventory costs related to such excipient prior to regulatory approval of the new supplier and the improved manufacturing process.

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otherwise, such costs are expensed as incurred as cost of goods sold.

The Company uses a contract manufacturing organization outside of the U.S.

for certain stages of inventory.

The Company periodically analyzes its inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value and writes down such inventories, as appropriate.

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

Acquisitions — The Company first determines whether a set of assets acquired constitute a business and should be accounted for as a business combination.

If the assets acquired do not constitute a business, the Company accounts for the transaction as an asset acquisition.

Business combinations are accounted for by means of the acquisition method of accounting.

Under the acquisition method, assets acquired, including in-process research and development (“IPR&D”) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in the Company’s consolidated financial statements.

The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill.

Contingent consideration obligations incurred in connection with a business combination (including the assumption of an acquiree’s liability arising from an acquisition it consummated prior to the Company’s acquisition) are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies have been resolved.

The resulting changes in fair values are recorded in earnings.

In contrast, asset acquisitions are accounted for by using a cost accumulation and allocation model.

Under this model, the cost of the acquisition is allocated to the assets acquired and liabilities assumed.

IPR&D projects with no alternative future use are recorded in R&D expense upon acquisition, and contingent consideration obligations incurred in connection with an asset acquisition are recorded when it is probable that they will occur and they can be reasonably estimated.

See Note 2 – Acquisition.

Goodwill and Other Intangible Assets – The fair value of acquired intangible assets is determined using an income-based approach referred to as the excess earnings method utilizing Level 3 fair value inputs.

Market participant valuations assume a global view considering all potential jurisdictions and indications based on discounted after-tax cash flow projections, risk adjusted for estimated probability of technical and regulatory success.

The Company will test for impairment annually on a reporting unit basis, at the beginning of the Company’s fourth fiscal quarter and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge will be recorded.

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life.

Estimated useful lives are determined considering the period assets are expected to contribute to future cash flows.

Finite-lived intangible assets are tested for impairment when facts or circumstances suggest that the carrying value of the asset may not be recoverable.

If the carrying value exceeds the

projected undiscounted pretax cash flows of the intangible asset, an impairment loss equal to the excess of the carrying value over the estimated fair value (discounted after-tax cash flows) is recognized.

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

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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 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.

The liability balance of the recognized loss on insulin purchase commitments as of June 30, 2022 and December 31, 2021 was $ 73.4 million and $ 82.8 million, respectively.

No new contracts were identified in 2021 or in the first six 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.

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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.

As of June 30, 2022, $ 65.0 million remained payable pursuant to the Milestone Rights Agreement upon achievement of Afrezza net sales milestones with $ 5.0 million included in accrued expenses and other current liabilities in our condensed consolidated balance sheets, which will be paid in the third quarter of 2022.

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.

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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.

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

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.

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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.

On May 17, 2022 , the Company entered into an Asset Purchase Agreement (the “APA”) to purchase from Zealand Pharma A/S and Zealand Pharma US, Inc.

(together “Zealand”) certain assets and assume certain liabilities associated with the V-Go wearable insulin delivery device.

The transaction closed on May 31, 2022 (the “Acquisition Date”).

Under the terms of the APA, the Company paid up-front consideration of $ 15.1 million for certain assets and assumed liabilities related to V-Go.

In addition, the Company will be obligated to make one-time, sales-based milestone payments to Zealand totaling up to a maximum of $ 10.0 million upon the achievement of specified annual revenue milestones between $ 40 million and $ 100 million.

The total preliminary purchase consideration for V-Go was as follows (in thousands):

Fair value of consideration:

Cash consideration

Fair value of contingent consideration

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their respective fair values as of the acquisition date.

The excess of the purchase price over those fair values was recorded as goodwill, which will be amortized over a period of 15 years for tax purposes.

The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates to reflect the risk inherent in the future cash flows.

The estimated fair values of assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its purchase price accounting.

The significant items for which a final fair value has not been determined include, but are not limited to the valuation of the intangible asset and assumed liabilities for rebates and return reserves.

The Company does not expect its fair value determinations to materially change;

however, there may be differences between the amounts recorded at the Acquisition Date and the final fair value analysis, which is expected to be complete no later than the second quarter of 2023.

The information below reflects the preliminary amounts of identifiable assets acquired and liabilities assumed as of the Acquisition Date (in thousands):

Property and equipment

Intangible asset - Developed technology

Operating lease right-of-use assets

Liabilities assumed

Operating lease liability

Total liabilities

Net assets acquired

Inventory of $ 11.2 million consisted of raw materials, semi-finished goods and finished goods.

The fair value of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 inputs not observable in the market.

Property and equipment and assumed liabilities were recorded at their carrying amounts which were deemed to approximate their fair values based on level 3 unobservable inputs.

The fair values of the right-of-use assets and lease liabilities for assumed operating leases were assessed in accordance with ASC Topic 842, Leases , based on discounted cash flow from lease payments, utilizing the Company’s incremental borrowing rate of 7.25 %.

The fair value of the intangible asset was determined by applying the income approach based on significant level 3 unobservable inputs.

The income approach estimates fair value based on the present value of cash flow that the assets could be expected to generate in the future.

We developed internal estimates for expected cash flows in the present value calculation using inputs and significant assumptions that include historical revenues and earnings, long-term growth rate, discount rate, contributory asset charges and future tax rates, among others.

The fair value of the contingent milestone liability was estimated using the Monte Carlo simulation method for the calculation of the potential payment and the Geometric Brownian Motion forecasting model to estimate the underlying revenue.

Market based inputs and other level 3 inputs were used to forecast future revenue.

The key inputs used included a risk-free rate of 2.95 %, dividend yield of 0 %, volatility of 65 %, period of 15 years and credit risk of 12 %.

The Company incurred acquisition-related costs of approximately $ 0.2 million for the three months ended June 30, 2022.

Supplemental Pro Forma Information (unaudited)

Net r evenue for the three and six months ended June 30, 2022 was $ 2.1 million and loss from operations for the three and six months ended June 30, 2022 was $ 0.3 million since the Acquisition Date.

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition had occurred on January 1, 2021 (in thousands):

Three Months Ended

Six Months Ended

Net loss per share - basic and diluted

These pro forma amounts have been calculated by applying the Company’s accounting policies assuming transaction costs had been incurred beginning January 1, 2021.

The Company did not have any other material nonrecurring pro forma adjustments directly attributable to the acquisition included in the reported pro forma revenue and loss.

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 June 30, 2022, the Company held $ 118.6 million of short-term investments and $ 32.6 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.

For the three and six months ended June 30, 2022, the Company recognized $ 0.5 million and $ 0.9 million of interest income on investments and $ 0.2 million and $ 0.5 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.

For the three and six months ended June 30, 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 June 30, 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.

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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 Company evaluated the fair value of its investment in Thirona as of June 30, 2022 by applying a Monte Carlo simulation and determined that the fair value was $ 6.8 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

For the six months ended June 30, 2022, an unrealized holding loss of $ 1.2 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-term and short-term investments are disclosed below (amounts in millions).

June 30, 2022

Investment Level

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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.

As of June 30, 2022 and December 31, 2021, there was $ 0.4 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):

March 31, 2022

June 30, 2022

December 31, 2021

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Total accounts receivable, net

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.

As of June 30, 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 76 % of commercial accounts receivable as of June 30, 2022 and approximately 73 % and 72 % of gross sales for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, there was no allowance for credit losses for accounts receivable – collaborations and services.

The Company had one collaboration partner, United Therapeutics, that comprised 99 % of the collaboration and services net accounts receivable as of June 30, 2022 and approximately 88 % and 90 % of gross revenue from collaborations and services for the three and six months ended June 30, 2022, respectively.

Inventories consist of the following (in thousands):

March 31, 2022

June 30, 2022

December 31, 2021

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Total inventory

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

Work-in-process and finished goods as of June 30, 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 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.

Raw materials inventory included $ 0.8 million of pre-launch inventory as of June 30, 2022 and December 31, 2021, which consisted of FDKP received in November 2019.

The Company expects to request approval from the FDA for 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 at March 31, 2022 and December 31, 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 June 30, 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.

For the three and six months ended June 30, 2022, 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 and six months ended June 30, 2021.

Property and Equipment

Property and equipment consists of the following (in thousands):

Property and equipment consists of the following (dollars in thousands):

Estimated Useful

March 31, 2022

June 30, 2022

December 31, 2021

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_________________________

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.

As of December 31, 2021 , c onstruction in progress included $ 4.7 million of equipment under construction for the manufacturing expansion for UT (the “UT Equipment”).

See Note 10 – Collaboration, Licensing and Other Arrangements.

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

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

The Company received $ 5.0 million in deposit for this service, which was recognized as deposits from customer in the condensed consolidated balance sheet as of December 31, 2021.

In April 2022, the Company and UT agreed that UT would hold title to the UT Equipment at all times.

As such, there is no balance related to the UT Equipment included in construction in progress or deposit from customer in our consolidated condensed balance sheet as of June 30, 2022.

Depreciation expense related to property and equipment for the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended

Six Months Ended

Depreciation Expense

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.

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 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”) .

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See Note 13 – Commitments and Contingencies .

Goodwill and Other Intangible Asset

Goodwill — Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations.

The balance of goodwill was approximately $ 2.9 million as of June 30, 2022 as a result of our acquisition of V-Go in May 2022.

Goodwill is tested at least annually for impairment by assessing qualitative factors in determining whether it is more likely than not that the fair value of net assets is below their carrying amounts.

See Note 1 – Description of Business and Significant Accounting Policies .

Other Intangible Asset — Other intangible asset consisted of the following (dollars in thousands):

Estimated Useful

June 30, 2022

Net Book Value

Developed technology

Amortization expense related to the other intangible asset was de minimis for the three and six months ended June 30, 2022.

The Company evaluates its other intangible asset for potential impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

See Note 1 – Description of Business and Significant Accounting Policies .

Accrued Expenses and Other Current Liabilities

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

March 31, 2022

June 30, 2022

December 31, 2021

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

March 31, 2022

June 30, 2022

December 31, 2021

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MidCap credit facility

Mann Group promissory notes

Mann Group convertible note

Total debt — net carrying amount

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

March 31, 2022

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

June 30, 2022

December 31, 2021

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Mann Group convertible note

$ 18.4 million (plus $ 0.5 million accrued interest paid-in-kind)

$ 8.8 million

$18.4 million (plus $0.4 million accrued interest paid-in-kind)

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

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

The maturities of the Company’s borrowings as of June 30, 2022 are as follows (in thousands):

Total principal payments

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(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 c ommon s tock 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 common stock 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;

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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 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.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of 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.

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).

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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 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.

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 June 30, 2022, the unamortized debt issuance cost was $ 5.3 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.

In April 2021, $ 10.0 million was prepaid.

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 ).

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.

Under the terms of the MidCap credit facility, a third advance of $ 60.0 million (“Tranche 3”) became available to the Company after the Tyvaso DPI approval by the FDA through June 30, 2022 (see Note 10 – Collaboration, Licensing and Other Arrangements ).

The Company did not exercise its right to borrow Tranche 3.

The MidCap credit facility has been amended several times, including in April 2021 when 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 %.

As of June 30, 2022, the unamortized debt discount was $ 0.3 million and the unamortized prepayment penalty was $ 0.7 million.

Tranche 1 and Tranche 2 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 %.

Interest on each term loan advance is due and payable monthly in arrears.

Principal on each term loan advance under Tranche 1, Tranche 2 and, if applicable, Tranche 3 is payable in 24 equal monthly installments beginning September 1, 2023 , until paid in full on August 1, 2025 .

Principal on each term loan advance under Tranche 1 and Tranche 2 are payable in 24 equal monthly installments beginning September 1, 2023 , until paid in full on August 1, 2025 .

The Company has the option to prepay its existing term loans, in whole or in part, subject to early termination fees in an amount equal to 3.00 % of principal prepaid if prepayment occurs on or prior to April 22, 2022;

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and 1.00 % of principal prepaid if prepayment occurs on or after April 23, 2023 through the maturity date.

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

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

The MidCap credit facility, as amended, contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions.

The Company must also comply with a financial covenant relating to trailing twelve month minimum Afrezza net revenue, tested on a monthly basis, unless the Company has $ 90.0 million or more of unrestricted cash and short-term investments.

The Company is also subject to a minimum cash covenant of $ 10.0 million at all times;

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

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

As of June 30, 2022, the Company was in compliance with the financial 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.

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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.

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):

During the quarter ended June 30, 2022, Mann Group converted $ 10.0 million of principal and capitalized interest into 4,000,000 shares of common stock.

In addition, the Company paid quarterly interest by issuing the Mann Group 31,541 shares of common stock.

Amortization of debt discount and debt issuance cost related to all borrowings for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

Three Months Ended

Six Months Ended

Amortization of debt discount

Amortization of debt issuance cost

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.

Milestone Rights — As of June 30, 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.

As of December 31, 2021, 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 in milestone liabilities in our condensed consolidated balance sheets.

During the second quarter of 2022, the Company achieved an Afrezza net sales milestone specified by the Milestone Rights.

The carrying value of the Milestone Rights liability related to the $ 5.0 million payment, which will be made in the third quarter of 2022, is approximately $ 1.1 million and represents the fair value as determined in 2013 (the most recent measurement date).

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

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Collaboration, Licensing and Other Arrangements

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

Revenue from collaborations and services for the three and six months ended June 30, 2022 and 2021 are as follows (in thousands):

Three Months Ended

UT License Agreement (1)

Six Months Ended

UT CSA Agreement (1)

Cipla License and Distribution Agreement

UT License Agreement (2)

Vertice Pharma Co-Promotion Agreement

Cipla License and Distribution Agreement

Total revenue from collaborations and services

_________________________

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 .

Amount consists of revenue recognized for Manufacturing Services and sales of product to UT for the periods presented.

Amounts consist of revenue recognized for Next-Gen R&D Services and R&D Services and License for the periods presented.

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.

The Company is responsible for the manufacturing of Tyvaso DPI.

Three Months Ended

Six Months Ended

UT Revenue (in thousands)

UT CSA Agreement

UT License Agreement

Total revenue from UT

Under the terms of the UT License Agreement, the Company received an upfront payment of $ 45.0 million in October 2018 and four $ 12.5 million milestone payments between April 2019 and November 2020.

The Company will also be entitled to receive low double-digit royalties on net sales of Tyvaso DPI as well as a manufacturing margin on commercial supplies of the product.

The Company is also entitled to receive low double-digit royalties on net sales of Tyvaso DPI as well as a manufacturing margin on commercial supplies of the product.

UT, at its option, may expand the scope of the products covered by the UT License Agreement to include products with certain other active ingredients for the treatment of pulmonary arterial hypertension.

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.

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.

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.

In August 2021, the Company and UT 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 UT.

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

Pursuant to the CSA, UT is obligated to reimburse 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 Next-Gen R&D Services;

(2) development activities for the next g eneration of Next-G en R&D Services;

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

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.

Following the FDA’s approval of Tyvaso DPI, UT began issuing the Company purchase orders for the supply of product, which represents distinct contracts and performance obligations under ASC 606.

Revenue is recognized for the supply of product at a point in time, once control is transferred to UT.

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) UT provides notice to the Company at least 24 months in advance of such renewal that UT does not wish to renew the CSA or (ii) the Company provides notice to UT at least 48 months in advance of such renewal that the Company does not wish to renew the CSA.

The Company and UT 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.

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

Revenue Allocation (1)

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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.

Following the commercial launch of Thyquidity, in consideration of the sales and promotional activities provided by the Company’s sales force, Vertice Pharma is obligated to pay fixed quarterly payments to the Company, as well as variable consideration based on gross profits resulting from all sales of Thyquidity.

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

The allocation of the transaction price for the Manufacturing Services includes a material right related to the Company’s estimated production of product in the amount of $ 144.5 million .

The Company will sell product to UT under individual purchase orders, which represent distinct performance obligations.

The ultimate cash flows may vary as manufacturing purchase orders are received.

In April 2022, the Company and UT agreed to fund $ 2.3 million in capital improvements to support commercialization and continuous improvement activities and $ 0.7 million in the development of alternative manufacturing processes.

The Company determined that the capital improvements and continuous improvements should be combined with the manufacturing services performance obligation and the alternative manufacturing processes should be combined with the Next-Gen R&D Services.

Revenue Allocation

Recognition Method

Progress Measure

(in millions)

Total anticipated cash flow (1)

Distinct Performance Obligation

R&D Services and License

Aug 2021 - Oct 2021

Next-Gen R&D Services

% of completion of costs

Manufacturing Services and

Product Sales (2)

Point in time

Transfer of control

_________________________

N otes presented in the previous modification table above also apply to this modification table unless noted otherwise.

The total anticipated cash flow includes a transaction price of $ 71.5 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $ 411.7 million for future supply of Tyvaso DPI over the remaining term of the CSA.

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 the transaction price for the Manufacturing Services includes a material right related to the Company’s estimated production of product in the amount of $ 150.2 million .

The Company will sell product to UT under individual purchase orders, which represent distinct performance obligations.

The ultimate cash flows may vary as manufacturing purchase orders are received.

As of June 30, 2022, deferred revenue consisted of $ 29.8 million, of which $ 1.5 million was classified as current and $ 28.3 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 pursuant to which the Company’s sales force promoted Thyquidity to adult endocrinologists, pediatric endocrinologists and other healthcare providers who treat hypothyroidism.

Following the commercial launch of Thyquidity in February 2021, Vertice Pharma became obligated to pay fixed quarterly payments to the Company, as well as variable consideration based on gross profits resulting from all sales of Thyquidity.

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 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.

As of December 31, 2021, the Company had fully reserved $ 0.8 million of revenue from the co-promotion of Thyquidity, which was recognized as allowance for credit losses and was included in accounts receivable, net in the condensed consolidated balance sheet.

In June 2022, the Company and Vertice Pharma reached a final settlement of all obligations related to the termination of the co-promotion agreement of $ 0.3 million, which was recognized as revenue from collaboration and services in the Company’s condensed consolidated statement of operations and the balance was written off against the reserve.

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.

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

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

however, no consideration will be exchanged between the parties.

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Biomm commenced product sales in January 2020.

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

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

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

5 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 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.

As of June 30, 2022, the deferred revenue balance was $ 1.6 million, of which $ 0.2 million is classified as current and $ 1.4 million is classified as long term in the condensed consolidated balance sheets.

Fair Value of Financial Instruments

12 unchanged sentences

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

Cash Equivalents — 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 June 30, 2022 and December 31, 2021, the Company held $ 35.5 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):

March 31, 2022

June 30, 2022

Carrying Value

3 unchanged sentences

MidCap credit facility (2)

Mann Group convertible notes (3)

Mann Group convertible note (3)

Milestone rights (4)

4 unchanged sentences

A change in yield of + or – 2 % would result in a fair value of $ 39.9 million and $ 42.9 million, respectively.

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.

The fair value assessed as of June 30, 2022 was determined by applying a discounted cash flow analysis with a hypothetical yield of 12 % and volatility of 75.3 % 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 $ 15.4 million and $ 16.3 million, respectively.

6 unchanged sentences

MidCap credit facility (2)

Mann Group convertible notes (3)

Mann Group convertible note (3)

Milestone rights (4)

12 unchanged sentences

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.

Contingent milestone liability — The acquisition of V-Go on May 31, 2022 resulted in a contingent milestone liability which could result in obligations to the seller if certain revenue thresholds are met.

The initial fair value of the contingent milestone liability was recorded as an adjustment to the purchase price.

Subsequent changes in the fair value are reported in selling, general and administrative expenses.

As of June 30, 2022, the fair value of the contingent milestone liability was consistent with the fair value on the Acquisition Date.

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 $ 9.5 million and a long-term financing liability of $ 94.4 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 %.

The fair value of $ 110.7 million was determined using level 3 inputs.

As of June 30, 2022, 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 .

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No other class of capital stock is authorized.

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.

As of June 30, 2022 and December 31, 2021, 257,276,847 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.

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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 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.

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.

For the six months ended June 30, 2022, there were no sales under the CF Sales Agreement.

For the six months ended June 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 CF Sales Agreement.

In the second quarter of 2022, Mann Group converted $ 10.0 million of principal and capitalized interest into 4,000,000 shares of common stock.

In addition, the Company paid quarterly interest by issuing the Mann Group 31,541 shares of common stock.

For the six months ended June 30, 2022, the Company received $ 0.7 million from the market price stock purchase plan (“MPSPP”) for 252,176 shares.

The Company received $ 0.1 million from the MPSPP for 25,000 shares during the three and six months ended June 30, 2021.

For shares of common stock issued pursuant to the ESPP, see Note 14 – Stock-Based Compensation Expense.

Earnings per Common Share (“EPS”)

4 unchanged sentences

Three Months Ended

Six Months Ended

EPS — basic and diluted:

4 unchanged sentences

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

Three Months Ended

Six Months Ended

Senior convertible notes

5 unchanged sentences

__________________________

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.

Market RSUs issued in 2020, 2021 and 2022 are included at the maximum share delivery of 300 %, 0 % and 200 %, respectively, in accordance with a valuation assessment obtained as of June 30, 2022.

Stock-Based Compensation Expense

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

During the six months ended June 30, 2022, the Company granted the following awards (in shares):

Three Months Ended

Six Months Ended

Employee awards:

Non-employee director RSUs

_________________________

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):

RSUs had a weighted average grant date fair value of $ 2.95 per share, of which 66,600 had a cliff vesting period of three years and 2,102,717 RSUs had a vesting period of four years .

Market RSUs had a grant date fair value of $ 6.10 per share and will vest on May 10, 2025 provided the closing price of the Company’s common stock on such vesting date is not less than the closing price on May 10, 2022.

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 10, 2022 until May 10, 2025 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 $ 2.95 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.

As of June 30, 2022, there was $ 1.6 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 2.82 years, and $ 14.5 million and $ 15.3 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 2.92 and 1.81 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 and six months ended June 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended

Six Months Ended

RSUs and options

6 unchanged sentences

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

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.

The Company issued 233,401 and 292,981 shares of common stock pursuant to the ESPP for the six months ended June 30, 2022 and 2021, respectively.

There were approximately 0.9 million shares of common stock available for issuance under the ESPP as of June 30, 2022.

Commitments and Contingencies

9 unchanged sentences

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

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.

As of June 30, 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 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 9 – 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.

The fair value of the Milestone Rights is recorded in the condensed consolidated balance sheet, including $ 2.0 million in accrued expenses and other current liabilities and $ 3.9 million in milestone liabilities.

Sale-Leaseback Transaction — In November 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.

5 unchanged sentences

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 June 30 , 2022, the related financing liability was $ 103.9 million, which was recognized in our condensed consolidated balance sheet as $ 94.4 million of financing liability — long-term and $ 9.5 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

Financing liability information is as follows:

June 30, 2022

December 31, 2021

2 unchanged sentences

Three Months Ended

Six Months Ended

Interest expense on financing liability

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

March 31, 2022

Financing liability payments as of June 30 , 2022 were as follows (in thousands):

June 30, 2022

December 31, 2021

6 unchanged sentences

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 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

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 six months ended June 30, 2021.

The remaining purchase commitments as of June 30, 2022 were as follows:

June 30, 2022

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.

11 unchanged sentences

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 offices in Westlake Village, California.

The office lease commenced in October 2018.

The Company agreed to pay initial monthly lease payments of $ 35,969 , subject to a 3 % annual increase, plus the estimated operating cost of maintaining the property by the landlord, which are allocable based an annual assessment made by the landlord.

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.

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.

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 which was renewed in April 2022.

Pursuant to the renewal, the Company will pay initial monthly payments of $ 79,543 , beginning in February 2023, subject to 3 % annual increases, plus the estimated cost of maintaining the property and common areas by the landlord.

The Company will receive a six-month concession at the start of the lease extension period on July 31, 2023.

The Company has no further right to extend the lease term beyond the Extension Period.

The Company assumed certain leased real property (the “Marlborough Lease”) pursuant to the APA entered into in May 2022.

The Marlborough Lease pertains to certain premises in a building located in Marlborough, Massachusetts.

The Company will pay initial monthly payments of $ 28,895 , beginning in June 2022, subject to approximately 3 % annual increases through February 28, 2026.

The Company also acquired rights to a manufacturing service agreement where V-Go are manufactured using Company-owned equipment located at the manufacturing facility.

The Company determined that this arrangement results in an embedded lease which grants the Company exclusive use of space within the manufacturing facility.

The Company assessed the embedded lease cost to be $ 14,370 per month through February 28, 2026.

Lease information is as follows (in thousands):

Three Months Ended

Six Months Ended

Operating lease costs

Variable lease costs

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

Weighted average discount rate

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

March 31, 2022

Future minimum office and vehicle lease payments as of June 30, 2022 and December 31, 2021, are as follows (in thousands):

June 30, 2022

December 31, 2021

3 unchanged sentences

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.

During the six months ended June 30, 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