What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 224 added, 143 removed, 983 unchanged (27% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

June 30, 2022

September 30, 2022

December 31, 2021

19 unchanged sentences

Mann Group convertible note

Accrued interest — promissory notes

Accrued interest — promissory note

Financing liability — long term

8 unchanged sentences

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

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

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

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

263,156,165 and 251,477,562 shares issued and outstanding

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

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

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net revenue — commercial product sales

Revenue — collaborations and services

Royalties — collaborations

Total revenues

3 unchanged sentences

Selling, general and administrative

(Gain) loss on foreign currency translation

Asset impairment

Gain on foreign currency translation

Loss on purchase commitments

5 unchanged sentences

Interest expense on notes

Loss on extinguishment of debt, net

Other expense

Gain (loss) on extinguishment of debt, net

Other (expense) income

Total other expense

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive loss:

5 unchanged sentences

(In thousands)

Comprehensive

Accumulated Other

Paid-in Capital

Comprehensive Loss

BALANCE, JANUARY 1, 2021

25 unchanged sentences

BALANCE, JUNE 30, 2021

Comprehensive

Issuance of common stock associated

with debt interest payment

Net issuance of common stock associated

with stock options and restricted stock

Stock-based compensation expense

BALANCE, SEPTEMBER 30, 2021

Accumulated Other

Paid-in Capital

Comprehensive Loss

BALANCE, JANUARY 1, 2022

19 unchanged sentences

BALANCE, JUNE 30, 2022

Issuance of at-the-market placement

Issuance costs associated with at-the-

market placement

Issuance of common stock pursuant to

conversion of the Mann Group

convertible note interest

Issuance of common stock under

Employee Stock Purchase Plan

Net issuance of common stock associated

with stock options and restricted stock

Stock-based compensation expense

BALANCE, SEPTEMBER 30, 2022

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Amortization of right-of-use assets

Interest expense on promissory notes

Interest expense on Mann Group promissory note

Gain on foreign currency translation

Write-off of inventory

Payment-in-kind interest on Mann Group promissory note

Loss on extinguishment of debt

Asset impairment

Changes in operating assets and liabilities:

6 unchanged sentences

Recognized loss on purchase commitments

Accrued interest on Mann Group promissory notes

Accrued interest on Mann Group Mann Group promissory note

Customer deposits

10 unchanged sentences

Proceeds from market price stock purchase plan

Payment of employment taxes related to vested restricted stock units

and exercise of stock options

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

Principal payments on Mann Group Mann Group promissory note

Payment of MidCap credit facility

3 unchanged sentences

Issuance costs associated with at-the-market offering

Net cash (used in) provided by financing activities

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

8 unchanged sentences

Addition of right-of-use asset

UT owned property and equipment

Non-cash construction in progress and property and equipment

2 unchanged sentences

Premium on Mann Group convertible note

Forgiveness of PPP loan

See notes to condensed consolidated financial statements.

6 unchanged sentences

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

The results of operations for the three and six months ended June 30, 2022 may not be indicative of the results that may be expected for the full year.

The results of operations for the three and nine months ended September 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.

15 unchanged sentences

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.

As of September 30, 2022, the Company had capital resources of $ 54.3 million in cash and cash equivalents, $ 110.7 million in short-term investments, $ 12.7 million in long-term investments, $ 278.8 million of total principal amount of outstanding borrowings, $ 104.0 million of total amount of financial liability related to a sale-leaseback transaction, and an accumulated deficit of $ 3.2 billion.

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 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.

36 unchanged sentences

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

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

71 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net revenue (in thousands)

8 unchanged sentences

Three Months Ended

Six Months Ended

Cost of revenue and goods sold (in thousands)

September 30,

Nine Months Ended

September 30,

Cost of goods sold and cost of revenue (in thousands)

Product sales

Total cost of revenue and goods sold

Total cost of goods sold and cost of revenue

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

7 unchanged sentences

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.

9 unchanged sentences

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.

As of September 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 June 30, 2022, the Company held short-term and long-term investments of debt securities, including commercial paper and bonds.

As of September 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.

17 unchanged sentences

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

Treasury securities with maturities less than 90 days.

Treasury securities with original or remaining maturities of 90 days or less at the time of purchase.

Investments generally consist of commercial paper, corporate notes or bonds and U.S.

7 unchanged sentences

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.

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.

8 unchanged sentences

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

for certain stages of inventory.

for certain stages of V-Go 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.

21 unchanged sentences

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.

The Company tests 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.

2 unchanged sentences

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.

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.

3 unchanged sentences

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

The liability balance of the recognized loss on insulin purchase commitments 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.

The liability balance of the recognized loss on insulin purchase commitments as of September 30, 2022 and December 31, 2021 was $ 70.2 million and $ 82.8 million, respectively.

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

7 unchanged sentences

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 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.

As of September 30, 2022, $ 60.0 million remained payable pursuant to the Milestone Rights Agreement upon achievement of Afrezza net sales milestones.

The Milestone Rights liability is reported at fair value at the date of the agreement which is periodically offset against payments.

(See Note 11 – Fair Value of Financial Instruments ) .

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.

19 unchanged sentences

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

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

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

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

15 unchanged sentences

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

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

Recently Issued Accounting Standards — In March 2020, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard to ease the financial reporting burdens caused by the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, commonly referred to as reference rate reform.

The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting.

Specifically, a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment of a previous accounting treatment.

Moreover, for all types of hedging relationships, an entity is permitted to change the reference rate without having to redesignate the hedging relationship.

The standard is generally effective for all contract modifications made and hedging relationships evaluated through December 31, 2022.

In January 2021, the FASB issued a new accounting standard that expanded the scope of the original March 2020 standard to include derivative instruments on discounting transactions.

The Company has adopted these standards in the third quarter of 2022 using the prospective method and has determined there is no impact on our condensed consolidated financial statements.

In November 2021, the FASB issued a new accounting standard around the recognition and measurement of contract assets and contract liabilities from revenue contracts with customers acquired in a business combination.

The new standard clarifies that contract assets and contract liabilities acquired in a business combination from an acquiree should initially be recognized by applying revenue recognition principles and not at fair value.

The standard is effective for interim and annual periods beginning on January 1, 2023, and early adoption is permitted.

The impact of this standard will depend on the facts and circumstances of future transactions.

Fr om time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.

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

33 unchanged sentences

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.

The Company incurred acquisition-related costs of approximately $ 0.2 million and $ 0.4 million for the three and nine months ended September 30, 2022, respectively.

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.

Net r evenue for the three and nine months ended September 30, 2022 was $ 5.4 million and $ 7.5 million, respectively, and loss from operations for the three and nine months ended September 30, 2022 was $ 0.2 million and $ 0.1 million, respectively, 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

September 30,

Nine Months Ended

September 30,

Net loss per share - basic and diluted

2 unchanged sentences

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

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 September 30, 2022, the Company held $ 110.7 million of short-term investments and $ 12.7 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 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.

For the three and nine months ended September 30, 2022, the Company recognized $ 0.7 million and $ 1.6 million of interest income on investments and $ 0.2 million and $ 0.6 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 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.

For the three and nine months ended September 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 September 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.

2 unchanged sentences

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 June 30, 2022 by applying a Monte Carlo simulation and determined that the fair value was $ 6.8 million.

The Company evaluated the fair value of its investment in Thirona as of September 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 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.

For the nine months ended September 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

September 30, 2022

Investment Level

19 unchanged sentences

Total Investments

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.

As of September 30, 2022 and December 31, 2021, there was $ 0.6 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):

June 30, 2022

September 30, 2022

December 31, 2021

9 unchanged sentences

Total accounts receivable, net

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.

As of September 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 78 % of commercial accounts receivable as of September 30, 2022 and approximately 75 % and 73 % of gross sales for the three and nine months ended September 30, 2022, respectively.

As of December 31, 2021, the Company had three wholesale distributors representing approximately 79 % of commercial accounts receivables and approximately 80 % of gross sales.

As of September 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 100 % of the collaboration and services net accounts receivable as of September 30, 2022 and approximately 100 % and 96 % of gross revenue from collaborations and services for the three and nine months ended September 30, 2022, respectively.

Inventories consist of the following (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Total inventory

Work-in-process and finished goods as of June 30, 2022 and December 31, 2021 include conversion costs and exclude the cost of insulin.

Work-in-process and finished goods as of September 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 June 30, 2022 and December 31, 2021, which consisted of FDKP received in November 2019.

Raw materials inventory included $ 0.8 million of pre-launch inventory as of September 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 June 30, 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 September 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.

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.

T here was an inventory write-off of $ 0.9 million and $ 1.4 million as a result of this assessment for the three and nine months ended September 30, 2022, respectively.

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

Property and Equipment

1 unchanged sentence

Estimated Useful

June 30, 2022

September 30, 2022

December 31, 2021

12 unchanged sentences

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):

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 September 30, 2022.

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Depreciation Expense

6 unchanged sentences

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.

The balance of goodwill was approximately $ 3.1 million as of September 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.

2 unchanged sentences

Estimated Useful

June 30, 2022

September 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.

Amortization expense related to the other intangible asset was de minimis for the three and nine months ended September 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.

2 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

9 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

8 unchanged sentences

$ 40.0 million

LIBOR (1% floor)

SOFR (1% floor)

Mann Group convertible note

5 unchanged sentences

The interest rate prior to the amendment was one-month LIBOR ( 2 % floor) plus 6.75 % and the maturity date was in August 2024 .

In August 2022, the Company amended the MidCap credit facility and transitioned the benchmark interest rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

The interest rate prior to the amendment was one-month LIBOR ( 1 % floor) plus 6.25 % (cap of 8.25 %).

In April 2021, the Mann Group convertible note was amended.

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 June 30, 2022 are as follows (in thousands):

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

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

Total principal payments

20 unchanged sentences

The Company may not redeem the Senior convertible notes prior to March 6, 2024 .

The Company may redeem for cash all or any portion of the Senior convertible notes, at its option, on or after March 6, 2024 and prior to the 36th scheduled trading day immediately preceding the maturity date, if the last reported sale price of common stock has been at least 130 % of the conversion price for the Senior convertible notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Senior convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company elects to redeem less than all of the outstanding Senior convertible notes, at least $ 75.0 million aggregate principal amount of Senior convertible notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Senior convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company elects to redeem less than all of the outstanding Senior convertible n otes, at least $ 75.0 million aggregate principal amount of Senior convertible n otes must be outstanding and not subject to redemption as of the relevant redemption notice date.

No sinking fund is provided for the Senior convertible notes .

8 unchanged sentences

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.

As of September 30, 2022, the unamortized debt issuance cost was $ 5.0 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.

5 unchanged sentences

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 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 %.

As of September 30, 2022, the unamortized debt discount was $ 0.3 million and the unamortized prepayment penalty was $ 0.6 million.

In August 2022, the Company entered into the tenth amendment to the MidCap credit facility to change the benchmark interest rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

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

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

3 unchanged sentences

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

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 Company’s obligations under the MidCap credit facility are 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.

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

As of September 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 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):

During the nine months ended September 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 $ 0.2 million of interest by issuing the Mann Group 57,491 shares of common stock.

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Amortization of debt discount

Amortization of debt issuance cost

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.

Milestone Rights — As of September 30, 2022 and December 31, 2021, the remaining Milestone Rights liability balance was $ 4.8 million and $ 5.9 million, respectively, 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.

As of September 30, 2022, the $4.8 million liability consisted of a $ 0.9 million current liability which was presented as accrued expenses and other current liabilities and a $ 3.9 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 carrying value of the Milestone Rights liability related to the $ 5.0 million payment, which was made in the third quarter of 2022, was approximately $ 1.1 million and represented 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.

1 unchanged sentence

Collaboration, Licensing and Other Arrangements

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

UT CSA Agreement (1)

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

UT Revenue (in thousands)

1 unchanged sentence

UT License Agreement

Royalties — Collaborations (1)

Total revenue from UT

_________________________

Amount consists of royalties associated with the UT license Agreement.

The current portion of contract assets related to the royalties is included in prepaid expense and other current assets in the condensed consolidated balance sheets .

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.

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(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 g eneration of Next-G en R&D Services;

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

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

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_________________________

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

Notes 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.

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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.

As of September 30, 2022, deferred revenue consisted of $ 32.2 million, of which $ 1.6 million was classified as current and $ 30.6 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 pursuant to which the Company’s sales force promoted Thyquidity to adult endocrinologists, pediatric endocrinologists and other healthcare providers who treat hypothyroidism.

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Biomm commenced product sales in January 2020.

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

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

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

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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 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.

As of September 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

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In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

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

The Company uses the exit

price method for estimating the fair value of loans for disclosure purposes.

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

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

The fair value of the cash equivalents, 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.

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

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.

As of September 30, 2022 and December 31, 2021, the Company held $ 54.3 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):

June 30, 2022

September 30, 2022

Carrying Value

5 unchanged sentences

Milestone rights (4)

Contingent milestone liability (4)

_________________________

3 unchanged sentences

A change in yield of + or – 2 % would result in a fair value of $ 39.5 million and $ 42.1 million, respectively.

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.

The fair value assessed as of September 30, 2022 was determined by applying a discounted cash flow analysis with a hypothetical yield of 13 % and volatility of 75.8 % 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 $ 12.9 million and $ 13.7 million, respectively.

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

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

The fair value assessed as of December 31, 2021 was determined by applying a discounted cash flow analysis with a hypothetical yield of 12 % and volatility

of 85 % to the straight note and a binomial option pricing model for the value of the conversion feature.

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

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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 $ 94.5 million.

The fair value of $ 103.2 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 September 30, 2022, the fair value was determined using a discounted cash flow analysis with a hypothetical yield of 10 %.

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 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.

As of September 30, 2022 and December 31, 2021, 263,156,165 and 251,477,562 shares of common stock, respectively, were issued and outstanding and no shares of preferred stock were outstanding.

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

1 unchanged sentence

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

For the 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.

For the nine months ended September 30, 2022, the Company sold 5,059,856 shares of common stock at a weighted average purchase price of $ 3.91 per share for gross proceeds of approximately $ 19.8 million pursuant to the CF Sales Agreement.

For the nine months ended September 30, 2021, the Company sold 578,063 shares of the Company’s common stock at a weighted average purchase price of $ 3.26 per share for 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.

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

In the third quarter of 2022, the Company paid quarterly interest by issuing Mann Group 25,950 shares of common stock.

For the nine months ended September 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 nine months ended September 30, 2021.

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

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

EPS — basic and diluted:

4 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Senior convertible notes

5 unchanged sentences

__________________________

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.

Market RSUs issued in 2020, 2021 and 2022 are included at the share delivery of 300 %, 0 % and 100 %, respectively, in accordance with a valuation assessment obtained as of September 30, 2022.

Stock-Based Compensation Expense

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

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

Three Months Ended

Six Months Ended

Three Months Ended

Nine Months Ended

September 30,

Employee awards:

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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):

RSUs had a weighted average grant date fair value of $ 3.78 per share, of which 357,000 RSUs had a cliff vesting period of two years , 320,400 RSUs had a cliff vesting period of three years , and 227,035 RSUs had a vesting period of four years .

As of September 30, 2022, there was $ 0.9 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 2.07 years, and $ 16.2 million and $ 13.2 million of unrecognized stock-based compensation expense related to RSUs and Market RSUs, respectively, which is expected to be recognized over a weighted average period of approximately 2.71 and 1.56 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 nine months ended September 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

RSUs and options

6 unchanged sentences

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

The Company issued 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.

The Company issued 531,419 and 527,049 shares of common stock pursuant to the ESPP for the nine months ended September 30, 2022 and 2021, respectively.

There were approximately 0.6 million shares of common stock available for issuance under the ESPP as of September 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 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.

As of September 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 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, $ 60.0 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 $ 2.0 million in accrued expenses and other current liabilities and $ 3.9 million in milestone liabilities.

As of September 30, 2022, the fair value of the Milestone Rights is recorded in the condensed consolidated balance sheet, including $ 0.9 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.

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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 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 September 30 , 2022, the related financing liability was $ 104.0 million, which was recognized in our condensed consolidated balance sheet as $ 94.5 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:

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Interest expense on financing liability

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

June 30, 2022

Financing liability payments were as follows (in thousands):

September 30, 2022

December 31, 2021

2 unchanged sentences

Total financing liability

_________________________

2022 includes amortization of the rent abatement.

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

1 unchanged sentence

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

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

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

September 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.

4 unchanged sentences

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

The revised monthly payment inclusive of maintenance fees, insurance and taxes is approximately $ 0.1 million and the additional right of use asset and lease obligation is approximately $ 1.4 million in the condensed consolidated balance sheets.

The revised monthly payment inclusive of maintenance fees, insurance and taxes is approximately $ 0.1 million.

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

16 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease costs

Variable lease costs

June 30, 2022

September 30, 2022

December 31, 2021

Operating lease right-of-use assets (1)

Weighted average remaining lease term (in years)

Weighted average discount rate

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

June 30, 2022

_________________________ _________________________

_________________________

Operating right-of-use assets related to vehicles, offices and the manufacturing facility are included in other assets in the condensed consolidated balance sheets.

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

September 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 six months ended June 30, 2022 the Company did no t recognize any interest or penalties.

During the nine months ended September 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