☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 31, 2017,~~July 28, 2023, there were ~~117,147,107~~268,355,182 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

September 30, 2017

December 31, 2016

ASSETS

Current assets:

Cash and cash equivalents

$
20,092

$
22,895

Accounts receivable, net

1,804

302

Receivable from Sanofi

—

30,557

Inventory

3,129

2,331

Asset held for sale

—

16,730

Deferred costs from commercial product sales

543

309

Prepaid expenses and other current assets

3,061

4,364

Total current assets

28,629

77,488

Property and equipment - net

27,374

28,927

Other assets

480

648

Total assets

$
56,483

$
107,063

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable

$
5,283

$
3,263

Accrued expenses and other current liabilities

12,492

7,937

Facility financing obligation

57,942

71,339

Deferred revenue - net

3,021

3,419

Deferred payments from collaboration - current

250

1,000

Recognized loss on purchase commitments - current

12,480

5,093

Total current liabilities

91,468

92,051

Note payable to principal stockholder

79,666

49,521

Accrued interest - note payable to principal stockholder

1,173

9,281

Senior convertible notes

27,657

27,635

Recognized loss on purchase commitments - long term

99,769

95,942

Deferred payments from collaboration - long term

563

—

Warrant liability

—

7,381

Milestone rights liability and other liabilities

7,202

8,845

Total liabilities

307,498

290,656

Commitments and contingencies (Note 11)

Stockholders' deficit:

Undesignated preferred stock, $0.01 par value - 10,000,000 shares authorized;
   no shares issued or outstanding at September 30, 2017 and December 31,
   2016

—

—

Common stock, $0.01 par value - 140,000,000 shares authorized, 104,707,116
   and 95,680,831 shares issued and outstanding at September 30, 2017
   and December 31, 2016, respectively

1,047

957

Additional paid-in capital

2,570,072

2,553,039

Accumulated other comprehensive loss

(20
)

(24
)
Accumulated deficit

(2,822,114
)

(2,737,565
)
Total stockholders' deficit

(251,015
)

(183,593
)
Total liabilities and stockholders' deficit

$
56,483

$
107,063

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues:

Net revenue - commercial product sales

$
1,981

$
573

$
4,726

$
573

Net revenue - collaboration

62

161,781

187

161,781

Revenue - other

—

—

2,302

—

Total revenues

2,043

162,354

7,215

162,354

Expenses:

Cost of goods sold

4,575

4,394

12,210

12,912

Product costs - collaboration

—

22,742

—

22,742

Research and development

4,361

3,917

10,611

13,357

Selling, general and administrative

17,725

13,135

51,681

31,595

Property and equipment impairment

92

—

203

695

Loss on foreign currency translation

3,684

1,012

12,077

3,035

Gain on purchase commitment

(215
)

(1,075
)

(215
)

(1,075
)
Total expenses

30,222

44,125

86,567

83,261

(Loss) income from operations

(28,179
)

118,229

(79,352
)

79,093

Other income (expense):

Change in fair value of warrant liability

(1,289
)

13,185

5,488

7,879

Interest income

65

28

178

70

Interest expense on notes

(2,310
)

(4,166
)

(7,438
)

(12,567
)
Interest expense on note payable to principal stockholder

(1,173
)

(729
)

(2,608
)

(2,172
)
Loss on extinguishment of debt

—

—

(830
)

—

Other (expense) income

—

(27
)

13

(613
)
Total other (expense) income

(4,707
)

8,291

(5,197
)

(7,403
)
(Loss) income before benefit for income taxes

(32,886
)

126,520

(84,549
)

71,690

Income tax benefit

—

—

—

—

Net (loss) income

$
(32,886
)

$
126,520

$
(84,549
)

$
71,690

Net (loss) income per share - basic

$
(0.31
)

$
1.32

$
(0.84
)

$
0.79

Net (loss) income per share - diluted

$
(0.31
)

$
1.31

$
(0.84
)

$
0.79

Shares used to compute basic net (loss) income per share

104,703

95,627

100,136

90,838

Shares used to compute diluted net (loss) income per share

104,703

96,549

100,136

90,873

Nine Months Ended September 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$
(84,549
)

$
71,690

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation, amortization and accretion

2,707

3,097

Stock-based compensation expense

3,763

4,130

Loss on extinguishment of debt

830

—

Gain on disposal of property and equipment

(24
)

—

Loss on foreign currency translation

12,077

3,035

Gain on purchase commitments

(215
)

(1,075
)
Interest incurred through borrowings under Sanofi Loan Facility

—

4,125

Interest on note payable to principal stockholder

2,608

2,172

Warrant issuance cost

—

653

Change in fair value of warrant liability

(5,488
)

(7,879
)
Other, net

247

717

Changes in operating assets and liabilities:

Accounts receivable, net

(1,502
)

(3,114
)
Receivable from Sanofi

30,557

—

Inventory

(798
)

(5,124
)
Deferred costs from collaboration

—

13,539

Deferred costs from commercial product sales

(234
)

(279
)
Prepaid expenses and other current assets

1,303

(516
)
Other assets

166

307

Accounts payable

2,099

(10,288
)
Accrued expenses and other current liabilities

2,889

6,575

Deferred sales from collaboration

—

(17,503
)
Deferred payments from collaboration

(187
)

(135,056
)
Deferred revenue, net

(398
)

2,014

Recognized loss on purchase commitments

(648
)

3,442

Net cash used in operating activities

(34,797
)

(65,338
)
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

—

(1,144
)
Net proceeds from sale of asset held for sale

16,651

—

Proceeds from sale of property and equipment

24

17

Net cash provided by (used in) investing activities

16,675

(1,127
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

—

772

Proceeds from direct placement

—

50,000

Issuance cost associated with direct placement

—

(2,690
)
Principal payments on facility financing obligation

(4,000
)

(5,000
)
Borrowings on note payable to principal stockholder

19,429

—

Payment of employment taxes related to vested restricted stock units

(110
)

(161
)
Net cash provided by financing activities

15,319

42,921

NET DECREASE IN CASH AND CASH EQUIVALENTS

(2,803
)

(23,544
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

22,895

59,074

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
20,092

$
35,530

SUPPLEMENTAL CASH FLOWS DISCLOSURES:

Interest paid in cash, net of amounts capitalized

$
6,373

$
7,198

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Repayment of facility financing obligation through issuance of common stock

$
11,000

$
—

Capitalization of interest on note payable to principal stockholder

$
10,716

$
—

Reclassification of warrant liability to additional paid-in capital

$
1,893

$
—

Reclassification of deferred payments from collaboration to Sanofi Loan Facility and
loss share obligation

$
—

$
4,713

1. Description of Business and Significant Accounting Policies

The ~~accompanying~~ unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries (“MannKind,” the “Company,” “we” or “us”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022, filed with the SEC on ~~March 16, 2017~~February 23, 2023 (the “Annual Report”).

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 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. Actual results could differ from those estimates or assumptions. 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. The more significant estimates ~~reflected in these accompanying condensed consolidated financial statements~~ include revenue recognition, including gross-to-net adjustments, stand-alone selling price considerations for recognition of collaboration revenue, assessing long-lived assets ~~and deferred product costs~~ for impairment, ~~accrued~~clinical trial expenses, inventory costing and recoverability, ~~valuation of the facility financing obligation,~~recognized loss on purchase ~~commitments, warrant liability,~~commitment, milestone rights liability, stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities, and ~~any~~the valuation allowance recorded against net deferred tax assets. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements.

Business — MannKind is a biopharmaceutical company focused on the development and commercialization of ~~inhaled~~innovative therapeutic products and devices to address serious unmet medical needs for ~~diseases such as diabetes~~those living with endocrine and ~~pulmonary arterial hypertension.~~orphan lung diseases. The Company’s ~~only approved product,~~signature technologies, Technosphere dry-powder formulations and Dreamboat inhalation devices, offer rapid and convenient delivery of medicines to the deep lung where they can exert an effect locally or enter the systemic circulation. The Company is currently commercializing Afrezza (insulin ~~human [rDNA origin]) inhalation powder, is a~~human) Inhalation Powder, an ultra rapid-acting inhaled insulin ~~that was approved by the U.S. Food and Drug Administration (the “FDA”) on June 27, 2014~~indicated to improve glycemic control in adults with ~~diabetes. Afrezza became available by prescription~~diabetes, and the V-Go wearable insulin delivery device, which provides continuous subcutaneous infusion of insulin in ~~U.S. retail pharmacies in February 2015. Pursuant~~adults that require insulin. The first product to a license and collaboration agreement (the “Sanofi License Agreement”) between the Company and Sanofi-Aventis U.S. LLC (“Sanofi”). Sanofi was responsible for global commercial, regulatory and development activities associated with Afrezza from August 2014 to April 2016. After a transition period during which Sanofi continued to fulfill orders for Afrezza, the Company began distributing MannKind-branded Afrezza to wholesalers in July 2016.During the second half of 2016, the Company utilized a contract sales organization to promote Afrezza while the Company focused its internal resources on establishing a channel strategy, entering into distribution agreements and developing co-pay assistance programs, a voucher program, data agreements and payor relationships. In early 2017, the Company recruited its own specialty sales force to promote Afrezza to endocrinologists and certain high-prescribing primary care physicians. The Company’s current strategy for future commercialization of Afrezza outsidecome out of the ~~United States, subject to receipt of~~orphan lung disease pipeline, Tyvaso DPI (treprostinil) inhalation powder, received approval from the ~~necessary foreign regulatory approvals, is to seek~~U.S. Food and ~~establish regional partnerships~~Drug Administration (“FDA”) in ~~foreign jurisdictions where there are appropriate commercial opportunities.~~

~~The Company has never been profitable or generated positive cash flow from cumulative operations to date. Historically, the Company has reported negative cash flow from operations other than~~May 2022 for the ~~nine months ended September 30, 2014, for the year ended December 31, 2014,~~treatment of pulmonary arterial hypertension (PAH) and for the ~~three months ended March 31, 2015~~treatment of pulmonary hypertension associated with interstitial lung disease (PH-ILD). The Company's development and ~~2017 as a result of non-recurring payments from Sanofi. As of September 30, 2017,~~marketing partner, United Therapeutics ("UT") began commercializing Tyvaso DPI in June 2022 and is obligated to pay the Company ~~had an accumulated deficit~~a royalty on net sales of ~~$2.8 billion.~~

~~At September 30, 2017,~~ the ~~Company’s capital resources consisted of cash and cash equivalents of $20.1 million.~~product. The Company ~~expects to continue to incur significant expenditures to support commercial manufacturing, sales and marketing~~also receives a margin on supplies of ~~Afrezza and the development~~Tyvaso DPI that it manufactures for UT.

Basis of ~~product candidates in the Company’s pipeline.~~Presentation — The facility agreement (the “Facility Agreement”) with Deerfield Private Design Fund II, L.P. (“Deerfield Private Design Fund”) and Deerfield Private Design International II, L.P. (collectively, “Deerfield”) that resulted in the issuance of 9.75% Senior Convertible Notes due 2019 (“2019 notes”) and the First Amendment to Facility Agreement and Registration Rights Agreement (the “First Amendment”) that resulted in the issuance of an additional tranche of 8.75% Senior Convertible Notes due 2019 (“Tranche B notes”) (see Note 6 — Borrowings) requires the Company to maintain at

least $25.0 million in cash and cash equivalents or available borrowings under the loan arrangement, dated as of October 2, 2007, between the Company and The Mann Group LLC (“The Mann Group”) (as amended, restated, or otherwise modified as of the date hereof, “The Mann Group Loan Arrangement”), as of the last day of each fiscal quarter. On June 29, 2017, the Company entered into an Exchange and Third Amendment to the Facility Agreement (the “Third Amendment”) with Deerfield which, among other things, amended such financial covenant to provide that, if certain conditions are met, then the obligation to maintain at least $25.0 million in cash as of the end of each quarter will be reduced to $10.0 million as of August 31, 2017, September 30, 2017, October 31, 2017 and December 31, 2017 (see Note 6 — Borrowings). The Company had no available borrowings under The Mann Group Loan Arrangement as of September 30, 2017.

On June 27, 2017, the Company borrowed the remaining $30.1 million principal amount available under The Mann Group Loan Arrangement, of which $19.4 million was received in cash and the remaining amount of $10.7 million representing accrued and unpaid interest as of June 30, 2017 was capitalized into borrowed principal (see Note 5 — Related-Party Arrangements). As a result, no additional funds remain available for borrowing under The Mann Group Loan Arrangement.

On March 1, 2017, following stockholder approval, the Company’s board of directors approved a 1-for-5 reverse stock split of its outstanding common stock. On March 1, 2017, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment of the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to effect the 1-for-5 reverse stock split of the Company’s outstanding common stock (the “Reverse Stock Split”) and to reduce the authorized number of shares of the Company’s common stock from 700,000,000 to 140,000,000 shares. The Company’s common stock began trading on the NASDAQ Global Market on a split-adjusted basis when the market opened on March 3, 2017. As a result, all common stock share amounts included in these condensed consolidated financial statements have been ~~retroactively reduced by a factor~~prepared in accordance with GAAP.

Principles of ~~five,~~Consolidation — The condensed consolidated financial statements include the accounts of the Company and ~~all common stock per share amounts~~its wholly-owned subsidiaries. Intercompany balances and transactions have been ~~increased by a factor of five, with the exception of the Company’s common stock par value.~~eliminated.

On April 18, 2017, the Company entered into an Exchange Agreement with Deerfield resulting in the cash repayment of $4.0 million under the Tranche B notes and the conversion of $1.0 million and $5.0 million of the Tranche B notes and the 2019 notes, respectively, into shares of common stock. On June 29, 2017, the Company entered into ~~the Third Amendment with Deerfield~~ resulting in the conversion of $5.0 million of the 2019 notes into shares of common stock and deferment of the payment of $10.0 million of principal amount of the 2019 notes due July 18, 2017 to October 31, 2017, which was further deferred to January 18, 2018 (see Note 6 —Borrowings and Note 15 – Subsequent Events).

The Company will need to raise additional capital, whether through a sale of equity or debt securities, a strategic business collaboration with another company, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to continue the development and commercialization of Afrezza and other product candidates and to support its other ongoing activities. The Company cannot provide assurances that such additional capital will be available on acceptable terms or at all. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Reclassifications— Certain prior year reported amounts ~~from previous periods~~ have been reclassified to conform towith the ~~2017~~current year presentation. Specifically, the Company reclassified property and equipment impairment, loss on foreign currency translation and gain on purchase commitments from the previously reported classification of cost of goods soldChanges were made to ~~separate line items on~~ the condensed consolidated ~~statement~~statements of ~~operations.~~cash flows to present the amortization of debt discount and issuance costs separately and to disclose net investment accretion under other, net. In addition, changes were made to the condensed consolidated ~~statement~~statements of ~~cash flows, the Company reclassified the gain on purchase commitments~~operations to present selling expenses separately from ~~the change in recognized loss on purchase commitments.~~general and administrative expenses.

~~Correction~~7

Segment Information — Operating segments are identified as components of an ~~Immaterial Error~~ — Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2016 on Form 10-K and prior to the filing of financial statements for the first quarter of 2017 on Form 10-Q, the Company determined that the common stock par value as of December 31, 2016 should not have been adjusted for the impact of the reverse stock split on March 3, 2017 as described above. Management evaluated the materiality of the errors from a quantitative and qualitative perspective and concluded that this adjustment was not material to the Company’s financial position as of March 31, 2017 or December 31, 2016 and that there was no impact to the results of operations for any periods presented. Since the revisions were not material, no amendments to previously filed reports were required. The Company has elected to revise the historical consolidatedenterprise about which separate discrete financial information ~~presented herein to reflect~~is available for evaluation by the ~~correction of this error for the prior period presented~~chief operating decision-maker in making decisions regarding resource allocation and ~~to conform to the current year presentation.~~

2016 as

Previously

2016 as

(In thousands)

Presented

Adjustments

Adjusted

Common stock

$
4,784

$
(3,827
)

$
957

Additional paid-in capital

$
2,549,212

$
3,827

$
2,553,039

~~Revenue Recognition~~ — Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. When the accounting requirements for revenue recognition are not met, the Company defers the recognition of revenue by recording deferred revenue on the condensed consolidated balance sheets until such time that all criteria are met.assessing performance. To date, the Company has ~~had~~viewed its operations and manages its business as one segment operating in the United States of America.

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

To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under ASC 606, including when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company has two types of contracts with customers: (i) contracts for commercial product sales ~~of Afrezza, collaborations, sale of intellectual property~~with wholesale distributors, specialty and ~~bulk insulin sales, which are described more fully below.~~retail pharmacies and (ii) collaboration arrangements.

Revenue Recognition –— Net Revenue – Commercial Product Sales – The Company currently sells Afrezza through two channels: wholesale distributors and specialty pharmacies as further described below. The Company provides the right of return for unopened product for a period beginning six months prior to and ending twelve months after its expiration date. This right of return is provided to (1) the Company’s wholesale distributors and, through them, to its retail pharmacy customers, and (2) to its specialty pharmacies. Once the product has been prescribed and dispensed to the patient, any right of return ceases to exist.

~~Sales of Afrezza through Wholesale Distributors~~ - Between July 1, 2016 and December 15, 2016, the Company sold Afrezza to Integrated Commercialization Solutions Direct (“ICS”) and title and risk of loss transferred to ICS upon shipment. After December 15, 2016, ICS became a third party logistics provider and stopped taking title and risk of loss upon shipment of Afrezza to ICS.— The Company sells ~~Afrezza~~its products to a limited number of wholesale distributors, specialty and retail pharmacies, and durable medical equipment suppliers (“DME”) in the ~~United States to wholesale pharmaceutical~~U.S. (collectively, its “Customers”). Wholesale distributors ~~through ICS, and ultimately~~subsequently resell the Company’s products to retail pharmacies ~~which are collectively referred~~and certain medical centers or hospitals. Specialty and retail pharmacies sell directly to ~~as “customers”.~~

~~Given~~patients. In addition to distribution agreements with Customers, the Company enters into arrangements with payers that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s limited sales history for Afrezza, through wholesale distributors, the Company cannot currently reliably estimate expected returns of the product at the time of shipment into the distribution channel. Accordingly, the Company defers recognition of revenue on Afrezza product shipments through wholesale distributors until the right of return no longer exists, which occurs at the earlier of the time Afrezza is dispensed from pharmacies to patients or expiration of the right of return. Deferred revenue is presented net of deferred product sales discounts which are further described in ~~Gross-to-net Adjustments~~ ~~below.~~ products.

The Company recognizes revenue on product sales when the Customer obtains control of the Company's product, which occurs at delivery for wholesale distributors based on Afrezza patient prescriptions dispensed as estimated by syndicated data provided by a third party. The Company also analyzes additional data points to ensure that such third-party data is reasonable, including data related to inventory movements within the channel and ~~ongoing prescription demand.~~

~~Sales of Afrezza through Specialty Pharmacies~~ ~~- During the three months ended September 30, 2017, the Company began selling Afrezza to a network of~~generally at delivery for specialty pharmacies. ~~Specialty pharmacies generally purchase product on demand. Title and risk of loss passes to the specialty pharmacies at shipment and our estimated returns are minimal. Therefore, the~~The Company recognizes revenue ~~for~~on product sales ~~through specialty pharmacies at the time~~to a retail pharmacy as the product is ~~shipped~~dispensed to patients. Product revenues are recorded net of applicable reserves, including discounts, allowances, rebates, returns and other incentives. See Reserves for Variable Consideration below.

Free Goods Program — From time to time, the Company offers programs to potential new patients that allow them to obtain free goods (prescription fills) from a pharmacy. The Company excludes such amounts related to these programs from both gross and net revenue. The cost of product associated with the free goods program is recognized as cost of goods sold in the condensed consolidated statements of operations.

Reserves for Variable Consideration — Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, payer rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts between the Company and its Customers, payers, and other indirect customers relating to the ~~specialty pharmacies, net~~Company’s sale of ~~Gross-to-net Adjustments~~its products. These reserves, as ~~described below. For the three and nine months ended September 30, 2017 the amount of revenue recognized from sales to specialty pharmacies was de minimis.~~

Net revenue from commercial product sales consisted of $2.0 million and $4.7 million of net sales of Afrezza, for the three and nine months ended September 30, 2017, respectively. As of September 30, 2017 and December 31, 2016, the ending balances for net deferred revenue, were $3.0 million and $3.4 million, on the Company’s condensed consolidated balance sheets which are presented net of $1.1 million and $0.8 million in gross-to-net revenue adjustments, respectively. The December 31, 2016 deferred revenue balance includes $1.7 million of bulk insulin sales which is described more fully under the heading ~~Revenue Recognition – Revenue – Other~~ ~~below. For the three and nine months ended September 30, 2017, shipments to three wholesale distributors represented 92% of total shipments.~~

~~Gross-to-net Adjustments –~~ ~~Estimated gross-to-net adjustments for Afrezza include wholesaler distribution fees, prompt pay discounts, estimated rebates and chargebacks and patient discount and co-pay assistance programs, and~~further detailed below, are based on ~~estimated~~the amounts ~~owed~~earned, or to be claimed on the related ~~sales. These~~sales, and result in a reduction of accounts receivable or establishment of a current liability. Significant judgment is required in estimating gross-to-net adjustments, including historical experience, payer channel mix, current contract prices under applicable programs, unbilled claims, claim submission time lags and inventory levels in the distribution channel.

Where appropriate, these estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reduce recognized revenue to the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. The Company’s ~~agreements~~analysis also contemplates application of the constraint in accordance with ~~its customers~~the guidance, under which it determined a material reversal of revenue would not occur in a future period for the current period estimates of gross-to-net adjustments and, therefore, the ~~levels~~transaction price was not reduced further during the current period. Actual amounts of ~~inventory within~~consideration ultimately received may differ from the ~~distribution~~Company’s estimates. If actual results in the future vary from the Company’s

estimates, the Company will adjust these estimates, which would affect net revenue from commercial product sales and ~~retail channels that may result~~earnings in ~~future rebates or~~the period such variances become known.

Trade Discounts and Allowances — The Company generally provides Customers with discounts ~~taken. In certain cases,~~which include incentives, such as ~~patient support programs,~~prompt pay discounts, that are explicitly stated in the ~~Company recognizes the cost of patient discounts~~Company’s contracts and are recorded as a reduction of revenue ~~based on estimated utilization. If actual future results vary,~~in the period the related product revenue is recognized. In addition, the Company compensates (through trade discounts and allowances) its Customers for sales order management, data, and distribution services. However, the Company has determined such services received to date are not distinct from the Company’s sale of products to the Customer and, therefore, these payments have been recorded as a reduction of revenue and as a reduction to accounts receivable, net.

Product Returns — Consistent with industry practice, the Company generally offers Customers a right of return for unopened product that has been purchased from the Company for a period beginning six months prior to and ending 12 months after its expiration date, which lapses upon shipment to a patient. The Company estimates the amount of its product sales that may ~~need to adjust these estimates, which could have an effect on product~~be returned by its Customers and records this estimate as a reduction of revenue in the period ~~of adjustment.~~the related product revenue is recognized, as well as reductions to accounts receivable, net. The Company ~~records~~currently estimates product returns using available industry data and its own sales ~~deductions~~information, including its visibility into the inventory remaining in the ~~condensed consolidated statements~~distribution channel. The Company’s current return reserve percentage is estimated to be in the single digits. 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 products from the Company. 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 ~~operations~~product revenue and the establishment of a current liability that is recorded in accrued expenses and other current liabilities. Chargeback amounts are generally determined at the time ~~product revenue is recognized. Gross-to-net adjustments were approximately $0.9 million~~of resale to the qualified healthcare provider by Customers, and ~~$2.4 million,~~the Company generally issues credits for such amounts within a few weeks of the Customer’s notification to the Company of the resale. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel inventories at each reporting period-end that the Company expects will be sold to qualified healthcare providers, and chargebacks that Customers have claimed, but for which ~~represents 30% and 33% of gross revenue from product sales for~~ the ~~three and nine months ended September 30, 2017, respectively. Gross-to-net items that are unpaid at the end of each period are presented in accrued expense and other current liabilities.~~Company has not yet issued a credit.

~~Wholesaler Distribution Fees –~~Government Rebates — The Company ~~pays distribution fees~~is subject to ~~certain wholesale distributors based on contractually determined rates. The Company accrues the distribution fees on shipment to the respective wholesale distributors~~discount obligations under Medicare and ~~recognizes the distribution fees as a reduction of revenue~~state Medicaid programs. These reserves are recorded in the same period the related revenue is ~~recognized.~~

~~Prompt Pay Discounts –~~ The Company offers cash discounts to its customers, generally 2% of the sales price, as an incentive for prompt payment. The Company accounts for cash discounts by reducing accounts receivable and deferred revenue by the prompt pay discount amount (at the time of shipment to the wholesale distributor). The Company recognizes cash discounts asrecognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses and other current liabilities. Estimates around Medicaid have historically required significant judgment due to timing lags in receiving invoices for claims from states. 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.

Payer Rebates — The Company contracts with certain private payer organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates these rebates, including estimates for product that has been recognized as revenue, but which remains in the distribution channel, and records such estimates in the same period the related revenue is ~~recognized.~~

~~Rebates and Chargebacks –~~ ~~The Company participates~~recognized, resulting in federal and state government-managed Medicare and Medicaid programs and, as such, is required to provide rebates under these programs. Chargebacks are discounts that occur when contracted customers purchase directly from an intermediary wholesale purchaser. Contracted customers, which currently consist primarilya reduction of ~~Federal government entities purchasing off the Federal Supply Schedule, generally purchase the~~ product at its contracted price, plus a mark-up from the wholesaler or specialty pharmacy. The wholesaler/specialty pharmacy, in-turn, charges back to the Company the difference between the price initially paid by the wholesaler/specialty pharmacyrevenue and the ~~contracted price paid to the wholesaler/specialty pharmacy by the customer.~~

establishment of a current liability which is included in accrued expenses and other current liabilities. The ~~Company accounts for these rebates~~Company’s estimates include consideration of historical claims experience, payer channel mix, current contract prices, unbilled claims, claim submission time lags and ~~chargebacks by establishing an accrual based on contractual discount rates, expected utilization under each contract and an estimate of the amount of~~ inventory in the distribution ~~channel that will become subject~~channel.

Other Incentives — Other incentives which the Company offers include voluntary patient support programs, such as the Company's co-pay assistance program, which are intended to ~~such rebates and chargebacks~~provide financial assistance to qualified commercially-insured patients with co-payments required by payers. The calculation of the accrual for co-pay assistance is based on ~~historical payor data provided by a third-party vendor along with additional data including forecasted participation rates. From that data, as well as input received from the commercial team,~~ an estimated participation rate for each program is determined and applied at the rate for those sales. Any new information regarding changes in the programs’ regulations and guidelines or any changes in the Company’s government price reporting calculations that would impact the amountestimate of ~~the rebates will also be taken into account in determining or modifying the appropriate reserve. The time period between the date the product is sold into the channel~~claims and the ~~date such rebates may be paid can be up~~cost per claim that the Company expects to approximately six to nine months. As such, continuous monitoring of these estimates will be performed on a periodic basis, and if necessary, adjusted to reflect new facts and circumstances. Rebates and chargebacks arereceive associated with the products that have been recognized as ~~a reduction of gross~~ revenue ~~in the period the related revenue is recognized.~~

~~Other Rebates and Discounts –~~ The Company has entered into agreements with certain third-party payors and with pharmacy benefit managers that act as an intermediary with certain third-party payors in the fulfillment of prescriptions. Under these agreements, the Company has agreed to provide certain contracted discounts to ease access to reimbursement for Afrezza patients including, but not limited to, the removal of prior authorization or step edit requirements or modifying the reimbursement tier under the payor’s formulary. The Company accounts for these charges by establishing an accrual based on the contracted discount rates and, with input received from management, estimated participation rates.

~~Patient Discount and Co-Pay Assistance Programs –~~ The Company offers discount card programs to patients for Afrezza in which patients receive discounts on their prescriptions or a reduction in their co-pay amounts that are reimbursed by the Company. The Company estimates the total amount that will be redeemed based on levels of inventoryremains in the distribution ~~and retail channels and recognizes~~channel inventories at the ~~discount as a reduction~~end of ~~gross revenue~~each reporting period. The adjustments are recorded in the same period the related revenue is ~~recognized.~~

~~Deferred Costs from Commercial Product Sales~~ ~~— Deferred costs from commercial product sales represents the cost~~recognized, resulting in a reduction of product ~~(including labor, overhead~~revenue and ~~shipping costs to~~ the ~~third party logistics provider) shipped to wholesale distributors, but not dispensed by retail pharmacies to patients. If the Company estimates~~establishment of a current liability that ~~inventory that has been shipped to wholesale distributors will be returned for credit because there~~ is ~~a risk of product expiry, deferred costs of commercial product sales is reduced~~included in accrued expenses and ~~cost of goods sold is increased for the cost of such inventory.~~other current liabilities.

Revenue Recognition ~~– Net~~— Revenue – Collaborations –and Services — The Company enters into ~~collaborations~~licensing, research or other agreements under which the Company licenses certain rights to its product candidates to third parties, conducts research or provides other services to third parties. The terms of these arrangements may include but are not limited to payment to the Company of one or more of the following: up-front license fees; development, regulatory, and commercial milestone payments; payments for commercial manufacturing and clinical supply services the Company provides; and royalties on net sales of licensed products and sublicenses of the rights. As part of the accounting for these arrangements, the Company must ~~perform certain~~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 the Company's significant collaboration and service agreement with UT that includes a long-term commercial supply agreement (as amended, the “CSA”), the Company has 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 the product (“Next-Gen R&D Services”); and (3) a material right associated with current and future 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 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. See Note 10 – Collaboration, Licensing and ~~receives periodic payments.~~ Other Arrangements.

If an arrangement has multiple performance obligations, the allocation of the transaction price is determined from observable market inputs, and the Company uses key assumptions to determine the stand-alone selling price, which may include development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success. Revenue is recognized based on the measurement of progress as the performance obligation is satisfied and consideration received that does not meet the requirements to satisfy the revenue recognition criteria is recorded as deferred revenue. Current deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months. Amounts that the Company expects will not be recognized within the next 12 months are classified as long-term deferred revenue. For further information, see Note 10 – Collaboration, Licensing and Other Arrangements.

The Company ~~evaluates~~recognizes upfront license payments as revenue upon delivery of the ~~collaborations under~~license only if the ~~multiple element revenue recognition accounting guidance. Revenue arrangements with multiple elements are divided into~~license is determined to be a separate ~~units~~unit of accounting from the other undelivered performance obligations. The undelivered performance obligations typically include manufacturing or development services or research and/or steering committee services. If the license is not considered as a distinct performance obligation, then the license and other undelivered performance obligations would be evaluated to determine if ~~certain criteria~~such should be accounted for as a single unit of accounting. If concluded to be a single performance obligation, the transaction price for the single performance obligation is recognized as revenue over the estimated period of when the performance obligation is satisfied. If the license is considered to be a distinct performance obligation, then the estimated revenue is included in the transaction price for the contract, which is then allocated to each performance obligation based on the respective standalone selling prices.

Whenever the Company determines that an arrangement should be accounted for over time, the Company determines the period over which the performance obligations will be performed, and revenue will be recognized over the period the Company is expected to complete its performance obligations. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.

The Company’s collaboration agreements typically entitle the Company to additional payments upon the achievement of development, regulatory and sales milestones. If the achievement of a milestone is considered probable at the inception of the collaboration, the related milestone payment is included with other collaboration consideration, such as upfront fees and research funding, in the Company’s revenue calculation. If these milestones are ~~met, including whether~~not considered probable at the ~~delivered elements have stand-alone value~~inception of the collaboration, the milestones will typically be recognized in one of two ways depending on the timing of when the milestone is achieved. If the milestone is improbable at inception and subsequently deemed probable of achievement, such will be added to the ~~customer.~~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.

The Company’s collaborative agreements, for accounting purposes, represent contracts with customers and therefore are not subject to accounting literature on collaborative agreements. The Company grants licenses to its intellectual property, supplies raw materials, semi-finished goods or finished goods, provides research and development services and offers sales support for the co-promotion of products, all of which are outputs of the Company’s ongoing activities, in exchange for consideration. Accordingly, the Company concluded that its collaborative agreements must generally be accounted for pursuant to ASC 606.

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

combination of licensing fees, event-based milestone payments and royalties. When ~~deliverables~~these amounts in aggregate are ~~separable, consideration received~~not offered at a discount that exceeds discounts available to other customers, the Company concludes the option does not contain a material right, and therefore is not included in the transaction price at contract inception. The Company assessed the CSA agreement with UT and determined that a material right existed for the manufacturing services performance obligation. The transaction price is allocated to the material right as well as the remaining performance obligations in accordance with ASC 606. The Company also evaluates grants of additional licensing rights upon option exercises to determine whether such should be accounted for as separate ~~units~~contracts.

Revenue Recognition – Royalties — The Company recognizes royalty revenue for a sales-based or usage-based royalty if it is promised in exchange for an intellectual property license. The royalty revenue is recognized as the latter of the subsequent sale of the product occurs or if the performance obligation to which the royalty has been allocated has been satisfied or partially satisfied. The Company’s collaborative agreement with UT entitles it to receive low double-digit royalties on net sales of Tyvaso DPI for the license of the Company’s IP that was considered to be interdependent with the development activities that supported the approval of Tyvaso DPI.

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenue:
Product sales (1)	$	29,278	$	17,417	$	58,004	$	28,427
Services (2)		278		1,173		500		2,155
Royalties (3)		19,055		304		30,733		304
Total net revenue	$	48,611	$	18,894	$	89,237	$	30,886

_________________________

(1)

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

(2)

Amounts represent revenue generated from the Company's 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.

(3)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of goods sold and cost of revenue:
Product sales	$	13,995	$	12,481	$	30,023	$	22,967
Services		242		434		427		946
Total cost of goods sold and cost of revenue	$	14,237	$	12,915	$	30,450	$	23,913

The Company follows detailed accounting guidance in measuring revenue and certain judgments affect the application of its revenue policy. For example, in connection with its existing collaboration agreements, the Company has recorded on its condensed consolidated balance sheets short-term and long-term deferred revenue based on its best estimate of when such revenue will be recognized. Short-term deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months. Amounts that the Company expects will not be recognized within the next 12 months are classified as long-term deferred revenue. However, this estimate is based on the Company’s current project development plan and, if the development plan should change in the future, the Company may recognize a different amount of deferred revenue over the next 12-month period.

Milestone Payments — At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the customer, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. 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 ~~deliverable~~subsequent reporting period, the Company will re-evaluate the probability of achievement of such development milestones and ~~the appropriate revenue recognition principles are applied to each unit. The assessment of multiple element arrangements requires judgment in order to determine the appropriate units of accounting~~any related constraint, and the points in time that, or periods over which, revenue should be recognized. The terms of and the accounting for the Company’s collaborations are described more fully in Note 7 — Collaboration Arrangements.

~~Revenue Recognition — Revenue — Other~~ consists of revenue from bulk insulin sales and the sale of intellectual property to Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”), which is accounted for under the multiple-deliverable revenue recognition guidance and more fully described in Note 8— Sale of Intellectual Property. Revenue from bulk insulin sales are recognized after delivery and customer acceptanceif necessary, adjusts its estimate of the ~~bulk insulin. When~~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 ~~accounting requirements for revenue recognition~~period of bulk insulin sales are not met, the Company defers recognition of revenue until such time that all criteria are met. The ending balance in deferred revenue related to bulk insulin sales was approximately $1.7 million as of December 31, 2016. There was no deferred revenue related to bulk insulin sales as of September 30, 2017. adjustment.

Cost of Goods Sold — Cost of goods sold includes ~~the costs related to Afrezza product dispensed by pharmacies to patients as well as excess-capacity~~material, labor ~~and overhead~~ costs and manufacturing overhead. Cost of goods sold also includes a component of current period manufacturing costs in excess of costs capitalized into inventory (“excess capacity costs”). These costs, in addition to the impact of the revaluation of inventory for standard costing, and write-offs of inventory are recorded as expenses in

the period in which they are incurred, rather than as a portion of inventory costs. Cost of goods sold excludes the cost of insulin purchased under the Company’s Insulin Supply Agreement (the “Insulin Supply Agreement”) with Amphastar Pharmaceuticals, Inc. (“Amphastar”). All insulin inventory on hand was written off and the full purchase commitment contract to purchase future insulin was accrued as a recognized loss on purchase commitments as of the end of 2016.

Cost of Revenues – Collaborations and Services — Cost of revenues for collaborations and services includes material, labor costs, manufacturing overhead, and excess capacity costs. These costs, in addition to the write-offs of inventory, are recorded as expenses in the period in which they are incurred, rather than as a portion of inventory costs. Cost of revenues for collaborations and services also includes the ~~inventory~~cost of product development.

Research and Development ("R&D") — Clinical trial expenses result from obligations under contracts with vendors, consultants and clinical site agreements in addition to internal costs associated with conducting clinical trials. R&D costs are expensed as incurred. Clinical study and certain research costs are recognized over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Nonrefundable advance payments for services to be received in the future for use in R&D activities are recorded as prepaid assets and expensed in the period when the services are performed.

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, 2023 and December 31, 2022, cash equivalents were comprised of money market funds, corporate bonds and commercial paper 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, 2023 and December 31, 2022, the Company held short-term and long-term investments of debt securities, including commercial paper and bonds.The Company assesses whether it has any intention to sell the investment before maturity, whether any declines in fair value are the result of credit losses, as well as whether there were other-than-temporary impairments associated with the available for sale investment. The Company intends to hold its investments until maturity; therefore, these investments are stated at amortized cost. The investments with maturities less than 12 months are included in short-term investments and investments with maturities in excess of twelve months are included in long-term investments in the condensed consolidated balance sheets. The amortization or accretion of the Company’s investments is recognized as interest income in the condensed consolidated statements of operations.

Available-for-Sale Investment — In June 2021, the Company purchased a $3.0 million convertible promissory note (the “Thirona convertible note”) issued by Thirona Bio, Inc. (“Thirona”). 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. The Thirona convertible notes were amended in February 2023, which extended the maturity date from December 31, 2022 to June 30, 2024. The Thirona convertible notes are general unsecured obligations of Thirona and accrue interest at a rate of 6% per annum. The Thirona convertible notes are classified as available-for-sale securities and are included in prepaid expenses and other current assets in the condensed consolidated balance sheets. The Company assesses whether it has any intention to sell the investment, determines fair value of its available-for-sale investments using level 3 inputs as well as assesses whether there were other-than-temporary impairments associated with the available-for-sale investment. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized. In June 2021, the Company and Thirona also entered into a collaboration agreement to develop a compound for the treatment of fibrotic lung diseases. See Note 10 – Collaboration, Licensing and Other Arrangements.

Concentration of Credit Risk — Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and investments. Cash and cash equivalents are held in high credit quality institutions. Cash equivalents consist of interest-bearing money market funds and U.S. 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. Treasury securities. The cash equivalents and investments are regularly monitored by management.

Accounts Receivable and ~~Allowances~~ Allowance for Credit Losses — Accounts receivable are recorded at the invoiced amount and are not interest bearing. ~~The Company maintains~~Accounts receivable are presented net of an allowance for ~~doubtful accounts for~~credit losses if there are estimated losses resulting from the inability of its customers to make required payments. The Company makes ongoing assumptions relating to the collectability of its accounts receivable in its calculation of the allowance for ~~doubtful accounts. If~~credit losses. The allowance for expected credit losses is based primarily on past collections experience relative to the ~~Company estimates~~length of time receivables are past due. However, when available evidence reasonably supports an assumption that ~~inventory that has been shipped to wholesale distributors~~future economic conditions will ~~be returned for credit because there~~differ from current and historical payment collections, an adjustment is ~~risk of product expiration, the Company reduces deferred revenue and increases~~reflected in the allowance for ~~returns for such inventory. As~~expected credit losses. Accounts receivable are also presented net of ~~September 30, 2017 and December 31, 2016, the~~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 ~~de minimis. As~~demonstrated to be viable and management expects to realize an economic benefit in the future as a result of ~~September 30, 2017 and December 31, 2016, there was no allowance for doubtful accounts. As of September 30, 2017 and December 31, 2016,~~such process improvement. Accordingly, the Company ~~had three wholesale distributors representing approximately 92%~~is required to assess whether to capitalize inventory costs related to such excipient prior to regulatory approval of the new supplier and ~~95%~~the improved manufacturing process. In doing so, management must consider a number of ~~gross accounts receivable, respectively.~~factors in order to determine the amount of inventory to be capitalized, including the historical experience of achieving regulatory approvals for the Company’s manufacturing process, feedback from regulatory agencies on the changes being effected and the amount of inventory that is likely to be used in commercial production. The shelf life of the excipient will be determined as part of the regulatory approval process; in the interim, the Company must assess the available stability data to determine whether there is likely to be adequate shelf life to support anticipated future sales occurring beyond the expected approval date of the new raw material. If management is aware of any specific material risks or contingencies other than the normal regulatory review and approval process, or if the criteria for capitalizing inventory produced prior to regulatory approval are otherwise not met, the Company would not capitalize such inventory costs, choosing instead to recognize such costs as R&D expense in the period incurred.

Inventories — Inventories are stated at the lower of cost or net realizable value. The Company determines the cost of inventory using the first-in, first-out, or FIFO, method. The Company capitalizes inventory costs associated with the Company’s products based on management’s judgment that future economic benefits are expected to be realized; 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 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 ~~net~~ realizable value and writes down such inventories, as appropriate. In addition, the Company’s products are subject to strict quality control and monitoring which the Company performs throughout the manufacturing process. If certain batches or units of product no longer meet quality specifications or may become obsolete or are forecasted to become obsolete due to expiration, the Company will record a charge to write down such unmarketable inventory to its estimated net realizable value. The Company analyzes its inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value. The Company performs an assessment of projected sales and evaluates the lower of cost or net realizable value and the potential excess inventory on hand at the end of each reporting period.

~~Leases~~Property and Equipment — Property and equipment is recorded at historical cost, net of accumulated depreciation. Depreciation expense is recorded over the assets’ useful lives on a straight-line basis. See Note 6 – ~~When determining~~Property and Equipment.

Impairment of Long-Lived Assets — Long-lived assets include property and equipment, operating lease ~~terms,~~right-of-use assets and other intangible assets. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Assets are considered to be impaired if the carrying value is considered to be unrecoverable.

Acquisitions — The Company ~~records rent~~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 R&D (“IPR&D”) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in the Company’s condensed 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 ~~leases~~estimated probability of technical and regulatory success.

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 ~~contain scheduled rent increases~~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 ~~lease term.~~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~~long-term purchase commitments should be accrued. Losses that are expected to arise from firm, non-cancellable, commitments for the future purchases are recognized unless recoverable. When making the assessment, the Company also considers whether it is able to renegotiate with its vendors. The recognized loss on purchase commitments is reduced as inventory items are received. If, subsequent to an accrual, a purchase commitment is successfully renegotiated, the gain is recognized in the Company’s condensed consolidated ~~statement of operations. No new contracts were identified in 2017 or 2016 that required a new loss on purchase commitment accrual.~~

~~Fair Value of Financial Instruments~~ — The carrying amounts reported in the accompanying 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, note payable to principal stockholder (also referred to as The Mann Group Loan Arrangement), senior convertible notes, the facility financing obligation, the milestone rights liability and the warrant liability are disclosed in Note 9 — Fair Value of Financial Instruments.

~~Stock-Based Compensation~~ — Share-based payments to employees, including grants of stock options, restricted stock units, performance-based awards and the compensatory elements of employee stock purchase plans, are recognized in the condensed consolidated statements of operations based upon the fair value of the awards at the grant date, subject to an estimated forfeiture rate. The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options and the compensatory elements of employee stock purchase plans. Restricted stock units are valued based on the market price on the grant date. The Company evaluates stock awards with performance conditions as to the probability that the performance conditions will be met and estimates the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period.

~~Warrants~~ —The Company accounts for its warrants as either equity or liabilities based upon the characteristics and provisions of each instrument and evaluation of sufficient authorized shares available to satisfy the obligations. Warrants classified as derivative liabilities are recorded on the Company’s condensed consolidated balance sheets at their fair value on the date of issuance and are revalued at each subsequent balance sheet date, with fair value changes recognized in the condensed consolidated statements of operations. The Company estimates the fair value of its derivative liabilities using a third party valuation analysis that utilizes a Monte Carlo pricing valuation model and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as expected volatility, expected life, yield, and risk-free interest rate. Warrants classified as equity are recorded within additional paid-in capital at the issuance date and are not re-measured

Milestone Rights Liability — In July 2013, in ~~subsequent periods, unless the underlying assumptions change to trigger liability accounting.~~

~~Net Income or Loss Per Share of Common Stock~~ — Basic net income or loss per share excludes dilution for potentially dilutive securities and is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per share reflects the potential dilution under the treasury method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For periods where the Company has presented a net loss, potentially dilutive securities are excluded from the computation of diluted net loss per share as they would be anti-dilutive.

~~Recently Issued Accounting Standards~~ – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s condensed consolidated financial position or results of operations upon adoption.

~~In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ which requires an entity to recognize the amount of revenue when promised goods or services to customers. The standard requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued additional ASUs which clarified certain aspects of the new guidance.

The Company will adopt the new guidance for the year beginning January 1, 2018. The Company has the option to either apply the new guidance retrospectively for all prior reporting periods presented (full retrospective) or retrospectivelyconjunction with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective). The Company currently anticipates it will apply the new guidance using the modified retrospective approach with the cumulative effect of initial application recognized as of January 1, 2018. The Company plans to continue analyzing the potential impacts of the application throughout 2017.

Currently, for commercial sales of Afrezza to wholesalers, the Company has limited sales and returns history, and as such is unable to reliably estimate expected returns of the product at the time of delivery into the distribution channel. Accordingly, the Company defers recognition of revenue on Afrezza product deliveries to wholesalers until the right of return no longer exists, which occurs at the earliest of the time Afrezza is dispensed from pharmacies to patients or expiration of the right of return. For deliveries to wholesalers, the Company recognizes revenue based on Afrezza patient prescriptions dispensed, a sell-through model, as estimated by syndicated data provided by a third party. The Company also analyzes additional data points to ensure that such third-party data is reasonable, including data related to inventory movements within the channel and ongoing prescription demand.

Upon adoption of the new guidance, the Company expects that it will move from its current sell-through model to a sell-to model for revenue related to commercial sales of Afrezza to wholesalers and will record revenue at the time title and risk of loss passes to its distributors (generally at delivery to the distributors) along with an estimate of potential returns as variable consideration. The Company also anticipates that its ability to estimate potential returns will improve with an additional three months of sales history that it will have obtained by January 1, 2018.

For sales of Afrezza to specialty pharmacies, the Company currently recognizes revenue at the time of shipment because specialty pharmacies generally purchase on demand and our estimated returns are minimal. The Company does not expect a material impact upon adoption for sales to specialty pharmacies.

Additionally, the Company has historically entered into collaborative agreements with third parties under which periodic payments have been received. Revenue recognition for certain payments received have been deferred until the price is fixed and determinable. Further, revenue for certain payments to be received in the future has been prohibited from recognition until received. The Company expects that some of these amounts will be considered variable consideration and may be able to be recognized earlier under the new guidance.

The financial impact upon the adoption will be dependent upon a number of factors, including the amount of revenue that has been deferred under the sell-through model for Afrezza, the amount of the revenue deferred under collaborative arrangements and the Company’s estimate of variable consideration at December 31, 2017. The Company is currently performing analysis of the inputs, assumptions and methodologies that will be used to recognize revenue related to variable consideration under the new guidance. For example, the Company expects to use an expected value approach to determine its reserve for Afrezza returns and because of the limited returns that the Company has experienced to-date, the Company may use a combination of its returns experience, data regarding the level of inventory remaining in the channel and the period to expiry, and applicable pharmaceutical industry returns data as inputs into the expected value approach.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments~~ — ~~Overall (Subtopic 825-10)~~: ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~. The update is intended to improve the recognition and measurement of financial instruments. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to materially impact the Company’s condensed consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 84~~2). The new standard requires that all lessees recognize the assets and liabilities that arise from operating leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The new standard will be effective on January 1, 2019. The Company is evaluating the impact the adoption of ASU No. 2016-02 will have on its condensed consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. The new standard seeks to reduce diversity in practice related to the classification of certain transactions in the statement of cash flows. For public business entities, the amendments in this standard are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The adoption of this standard is not expected to materially impact the Company’s condensed consolidated financial statements.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash.~~ This ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. ASU 2016-08 is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods, using a retrospective transition method to each period presented. The adoption of this standard is not expected to materially impact the Company’s condensed consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition~~execution of a ~~Business.~~ The ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company early adopted ASU 2017-01 in the first quarter of 2017, and it did not result in a material impact on the Company’s condensed consolidated financial statements and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.~~ ~~This ASU reduces both diversity in practice and cost and complexity when applying~~ ~~ASC 718~~ ~~to a change in the terms or conditions of a share-based payment award.~~ ~~ASU 2017-09~~ is effective for fiscal years beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The adoption of this standard is not expected to materially impact the Company’s condensed consolidated financial statements.

~~In July 2017, the FASB issued ASU No. 2017-11,~~ ~~Earnings per Share (Topic 260) and Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Provisions.~~ This ASU addresses the complexity and cost of accounting for certain financial instruments with down round features that require fair value measurement of the entire instrument or conversion option and requires entities that present earnings per share in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. The adoption of this standard is not expected to materially impact the Company’s condensed consolidated financial statements.

~~2. Inventory~~

~~Inventory consists of the following (in thousands):~~

September 30, 2017

December 31, 2016

Raw materials

$
345

$
—

Work-in-process

2,329

2,120

Finished goods

455

211

Total inventory

$
3,129

$
2,331

Work-in-process and finished goods as of September 30, 2017 and December 31, 2016 primarily include conversion costs because the materials used in its production were previously written off. During the three and nine months ended September 30, 2017, the Company recorded a write-down of inventory of approximately $0.3 million and $1.8 million, respectively, for inventory that was forecasted to become obsolete due to expiration which is recorded in costs of goods sold in the accompanying condensed consolidated statements of operations.

~~3. Property and Equipment~~

~~Property and equipment consist of the following (in thousands):~~

Estimated Useful

Life (Years)

September 30, 2017

December 31, 2016

Land

—

$
875

$
875

Buildings

39-40

17,389

17,389

Building improvements

5-40

34,957

34,957

Machinery and equipment

3-15

62,768

62,992

Furniture, fixtures and office equipment

5-10

3,556

3,556

Computer equipment and software

3

8,531

8,531

Construction in progress

—

—

202

128,076

128,502

Less accumulated depreciation

(100,702
)

(99,575
)
Total property and equipment, net

$
27,374

$
28,927

~~Depreciation expense related to property and equipment for the three and nine months ended September 30, 2017 and 2016 was as follows (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Depreciation expense

$
454

$
597

$
1,350

$
1,775

Management evaluated certain equipment that was not yet in service and determined that since the equipment was not being used and there was no current estimated date for installation and therefore no future cash flows associated with the equipment, a write-down of construction in progress of approximately $0.1 million and $0.2 million was recorded during the three and nine months ended September 30, 2017, respectively. An impairment of $0.7 million was charged to the individual asset groups for the nine months ended September 30, 2016.

On January 6, 2017, the Company and Rexford Industrial Realty, L.P. (“Rexford”) entered into an Agreement of Purchase and Sale and Joint Escrow Instructions (the “Purchase Agreement”), pursuant to which the Company agreed to sell and Rexford agreed to purchase certain parcels of real estate owned by the Company in Valencia, California and certain related improvements, personal property, equipment, supplies and fixtures (collectively, the “Property”) for $17.3 million. This asset in the amount of $16.7 million was classified as held for sale as of December 31, 2016. The sale and purchase of the Property for $17.3 million pursuant to the terms of the Purchase Agreement, as amended, was completed on February 17, 2017. Net proceeds were $16.7 million after deducting broker’s commission and other fees of approximately $0.6 million paid by the Company. Net proceeds received approximated the carrying value of the asset held for sale.

~~4. Accrued Expenses and Other Current Liabilities~~

~~Accrued expenses and other current liabilities consist of the following (in thousands):~~

September 30, 2017

December 31, 2016

Salary and related expenses

$
6,432

$
3,814

Current portion of milestone rights liability

1,643

—

Professional fees

1,063

875

Discounts and allowances for commercial product
sales

1,239

754

Sales and marketing services

797

144

Restructuring

362

1,376

Accrued interest

234

619

Other

722

355

Accrued expenses and other current liabilities

$
12,492

$
7,937

~~5. Related-Party Arrangements~~

In October 2007, the Company entered into The Mann Group Loan Arrangement, which has been amended from time to time. On October 31, 2013, the promissory note underlying The Mann Group Loan Arrangement, described in the Company’s condensed consolidated balance sheets as Note Payable ~~to Principal Stockholder,~~ ~~was amended to, among other things, extend the maturity date of the~~(now repaid) loan to January 5, 2020, extend the date through which the Company can borrow under The Mann Group Loan Arrangement to December 31, 2019, increase the aggregate borrowing amount under The Mann Group Loan Arrangement from $350.0 million to $370.0 million and provide that repayments or cancellations of principal under The Mann Group Loan Arrangement will not be available for reborrowing.

On June 27, 2017, the Company entered into an agreement with The Mann Group, pursuant to which the parties agreed to, among other things, (i) capitalize $10.7 million of accrued and unpaid interest as of June 30, 2017, resulting in such amount being classified as outstanding principal under The Mann Group Loan Arrangement; (ii) advance to the Company approximately $19.4 million of cash, the remaining amount available for borrowing by the Company under The Mann Group Loan Arrangement after the foregoing capitalization of accrued and unpaid interest; and (iii) defer all interest payable on the outstanding principal until July 1, 2018, unless such payments are otherwise permitted under the subordination agreement with Deerfield Private Design Fund II, L.P. and ~~subject to further deferral pursuant to the terms of the subordination agreement with~~ Deerfield ~~which terms are more fully disclosed below.~~

Interest, at a fixed rate of 5.84%, is due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter, or at such other time as the Company and The Mann Group mutually agree. The Mann Group can require the Company to prepay up to $200.0 million in advances that have been outstanding for at least 12 months, less approximately $105.0 million aggregate principal amount that has been cancelled in connection with two common stock purchase agreements. If The Mann Group exercises this right, the Company will have 90 days after The Mann Group provides written notice, or the number of days to maturity of the note if less than 90 days, to prepay such advances. However, pursuant to a letter agreement entered into in August 2010, The Mann Group has agreed to not require the Company to prepay amounts outstanding under the amended and restated promissory note if the prepayment would require the Company to use its working capital resources. In addition, The Mann Group entered into a subordination agreement with Deerfield pursuant to which The Mann Group agreed with Deerfield not to demand or accept any payment under The Mann Group Loan Arrangement until the Company’s payment obligations to Deerfield under the Facility Agreement have been satisfied in full. Subject to the foregoing, in the event of a default under The Mann Group Loan Arrangement, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at The Mann Group’s option, and the interest rate will increase to the one-year LIBOR calculated on the date of the initial advance or in effect on the date of default, whichever is greater, plus 5% per annum. All borrowings under The Mann Group Loan Arrangement are unsecured. The Mann Group Loan Arrangement contains no financial covenants.

As of September 30, 2017 and December 31, 2016, the total principal amount outstanding under The Mann Group Loan Arrangement was $79.7 million and $49.5 million, respectively. As of September 30, 2017, and December 31, 2016, the Company had accrued unpaid interest related to the above note of $1.2 million and $9.3 million, respectively. Interest expense on the Company’s note payable to the Company’s principal stockholder for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Interest expense on note payable to principal stockholder

$
1,173

$
729

$
2,608

$
2,172

~~In May 2015, the Company entered into a sublease agreement with the Alfred Mann Foundation for Scientific Research (the “Mann Foundation”~~Private Design International II, L.P. (collectively, “Deerfield”), a California not-for-profit corporation. The lease was for approximately 12,500 square feet of office space in Valencia, California, which expired in April 2017 and was renewed on a month-to-month basis at a rate of $20,000 per month until August 31, 2017 when the Company moved into its new corporate headquarters (see Note 11 — Commitments and Contingencies). Lease payments to the Mann Foundation for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Lease payments

$
40

$
67

$
161

$
200

The Company has entered into indemnification agreements with each of its directors and executive officers, in addition to the indemnification provided for in its amended and restated certificate of incorporation and amended and restated bylaws (see Note 11 — Commitments and Contingencies).

~~6. Borrowings~~

~~Borrowings consist of the following (in thousands):~~

September 30,
2017

December 31,
2016

Facility Financing Obligation (2019 Notes)

Principal amount

$
60,000

$
75,000

Unamortized debt discount

(2,058
)

(3,661
)
Net carrying amount

$
57,942

$
71,339

Senior Convertible Notes (2018 notes)

Principal amount

$
27,690

$
27,690

Unamortized premium

244

426

Unaccreted debt issuance costs

(277
)

(481
)
Net carrying amount

$
27,657

$
27,635

Note payable to principal stockholder - net carrying
amount

$
79,666

$
49,521

On October 23, 2017 the Company entered into an exchange agreement with the holders of the 2018 notes and a Fourth Amendment to the Facility Agreement as further discussed in Note 15- Subsequent Events. The information in this note has not been updated for these subsequent events.

~~Facility Financing Obligation (2019 Notes)~~ – On April 18, 2017, the Company entered into an Exchange Agreement with Deerfield pursuant to which the Company agreed to, among other things, (i) repay $4.0 million principal amount under the Tranche B notes; (ii) exchange $1.0 million principal amount under the Tranche B notes for 869,565 shares of the Company’s common stock (the “Tranche B Exchange Shares”); and (iii) exchange $5.0 million principal amount under the 2019 notes for 4,347,826 shares of the Company’s common stock (together with the “Tranche B Exchange Shares,” the “April Exchange Shares”). The exchange price for the Exchange Shares was $1.15 per share.

The Company determined that, since the principal amount repaid and exchanged under the Tranche B notes and the principal amount exchanged under the 2019 notes represented the principal amount that would have otherwise become due and payable in May and July of 2017 under the Tranche B notes and 2019 notes, respectively, the extinguishment of the May and July 2017 payments was not considered to be a troubled debt restructuring. Accordingly, the Company accounted for the transaction by recording a loss on

extinguishment of debt of $0.3 million at April 18, 2017 which was calculated as the difference between the reacquisition price and the net carrying value of the related debt. The reacquisition price was calculated using the $4.0 million cash repayment and the fair value of the April Exchange Shares on April 18, 2017. The fair value of the April Exchange Shares was determined to be $1.22 per share representing the closing trading price of the Company’s common stock on The NASDAQ Global Market on April 18, 2017.

On June 29, 2017, the Company entered into the Third Amendment with Deerfield, pursuant to which the Company agreed to, among other things, (i) exchange $5.0 million principal amount under the Company’s 2019 notes for 3,584,230 shares of the Company’s common stock (the “June Exchange Shares”) at an exchange price of $1.395 per share and (ii) amend the Facility Agreement with Deerfield, to (A) defer the payment of $10.0 million in principal amount of the 2019 notes from the original July 18, 2017 due date to August 31, 2017, which was further deferred to October 31, 2017 upon the Company’s delivery on August 31, 2017 and October 30, 2017 of a written certification to Deerfield that certain conditions had been met, including that no event of default under the Facility Agreement had occurred, Michael Castagna remains the Company’s Chief Executive Officer, the Company received the advance from The Mann Group (see Note 5 — Related-Party Arrangements), the Company had at least $10.0 million in cash and cash equivalents on hand, no material adverse effect on the Company had occurred, the engagement letter between the Company and Greenhill & Co., Inc. (“Greenhill”) remained in full force and effect and Greenhill had remained actively engaged in exploring capital structure and financial alternatives on behalf of the Company in accordance with such engagement letter (collectively, the “Extension Conditions”), and (B) amend the Company’s financial covenant under the Facility Agreement to provide that, if the Extension Conditions remain satisfied, the obligation under the Facility Agreement to maintain at least $25.0 million in cash and cash equivalents as of the end of each quarter will be reduced to $10.0 million as of August 31, 2017, September 30, 2017, October 31, 2017 and December 31, 2017.

The Company determined that since the principal amount repaid and exchanged under the 2019 notes represented the principal amount that would have otherwise become due and payable under the 2019 notes, the $5.0 million prepayment was not considered to be a troubled debt restructuring. Accordingly, the Company accounted for the transaction by recording a loss on extinguishment of debt of $0.5 million on June 29, 2017 which was calculated as the difference between the reacquisition price and the net carrying value of the related debt. The net carrying value of the related debt includes the acceleration of the debt discount and issuance costs amounting to approximately $0.3 million as a result of the transaction. The reacquisition price was calculated using the fair value of the June Exchange Shares on June 29, 2017. The fair value of the Exchange Shares was determined to be $1.45 per share representing the closing trading price of the Company’s common stock on The NASDAQ Global Market on June 29, 2017.

As of September 30, 2017, there was $45.0 million principal amount of 2019 notes and $15.0 million principal amount of Tranche B notes outstanding. The 2019 notes accrue interest at an annual rate of 9.75% and the Tranche B notes accrue interest at an annual rate of 8.75%. Interest is paid quarterly in arrears on the last day of each March, June, September and December. The Facility Financing Obligation principal repayment schedule is comprised of payments which began on July 1, 2016 and end on December 9, 2019. As of September 30, 2017, future payments for the years ending December 31, 2017, 2018, and 2019 are $10.0 million, $20.0 million and $30.0 million, respectively.

~~In connection with the Facility Agreement, on July 1, 2013,~~ the Company entered into a Milestone Rights Purchase Agreement (the “Milestone Rights Agreement”) ~~with~~pursuant to which the Company issued certain milestone rights to Deerfield Private Design Fund II, L.P. and Horizon Santé FLML SÁRL (the “Original Milestone Purchasers”). The foregoing milestone rights provided the Original Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and Afrezza sales milestones, $60.0 million of which remains payable as of June 30, 2023 upon achievement of such milestones (collectively, the “Milestone Rights”). In December 2021, the Milestone Rights were purchased by Barings Global Special Situations Credit Fund 4 (Delaware), L.P. and Barings Global Special Situations Credit 4 (LUX) S.ar.l. (together the “Milestone Purchasers”)~~, which requires the Company to make contingent payments to~~. As a result, the Milestone Purchasers ~~totaling up~~have assumed the obligations of the Original Milestone Purchasers and are now entitled to ~~$90.0 million,~~all rights under the Milestone Rights Agreement. 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. The expected timing and probability of achieving the milestones was developed with consideration given to both internal data, such as progress made to date and assessment of criteria required for achievement, and external data, such as market research studies. The discount rate was selected based on an estimation of required rate of returns for similar investment opportunities using available market data. The Milestone Rights liability will be remeasured as the specified milestone events are achieved. Specifically, as each milestone event is achieved, the portion of the initially recorded Milestone Rights liability that pertains to the milestone event being achieved will be remeasured to the amount of the specified related milestone payment. The resulting change in the balance of the Milestone Rights liability due to remeasurement will be recorded in the Company’s condensed consolidated statements of operations as interest expense. Furthermore, the Milestone Rights liability will be reduced upon the ~~Company achieving specified commercialization milestones (the “Milestone Rights”).~~settlement of each milestone payment. As a result, each milestone payment would be effectively allocated between a reduction of the recorded Milestone Rights liability and an expense representing a return on a portion of the Milestone Rights liability paid to the investor for the achievement of the related milestone event. As of ~~September~~June 30, ~~2017 and December 31, 2016, the remaining~~2023, a $5.0 million milestone rights ~~liability balance was $8.9 million. The Company currently estimates that it will reach the next milestone in the third quarter of 2018. Accordingly, $1.6 million in value related to the next milestone~~ payment was ~~recorded~~included in accrued expenses and other current liabilities ~~as of September 30, 2017, resulting~~ in ~~$7.2 million and $8.9 million being recorded in milestone rights liability and other liabilities, which is non-current, in the accompanying~~our condensed consolidated balance sheets, ~~as of September 30, 2017 and December 31, 2016, respectively.~~

~~Accretion of debt issuance cost and debt discount in connection with the Facility Agreement during the three and nine months ended September 30, 2017 and 2016,~~ which ~~includes the acceleration of the debt discount and issuance costs related to the transactions disclosed above, are as follows (in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Accretion expense - debt issuance cost

$
7

$
9

$
39

$
26

Accretion expense - debt discount

$
431

$
428

$
1,564

$
1,280

The Facility Agreement includes customary representations, warranties and covenants, including a restriction on the incurrence of additional indebtedness, and a financial covenant which requires the Company’s cash and cash equivalents on the last day of each fiscal quarter to notwill be ~~less than $25.0 million, or pursuant to the Third Amendment, $10.0 million as of the last day of each month~~

through October 31, 2017 and as of December 31, 2017 if certain conditions remained satisfied. As discussed in Note 1 – Description of Business and Summary of Significant Accounting Policies, the Company will need to raise additional capital to support its current operating plans. Due to the uncertainties related to maintaining sufficient resources to comply with the aforementioned covenant, the 2019 notes and Tranche B notes have been classified as current liabilitiespaid in the accompanying condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016. In the event of non-compliance, Deerfield may declare all or any portion of the 2019 notes and/or Tranche B notes to be immediately due and payable.

~~Milestone Rights~~ — The Milestone Agreement includes customary representations and warranties and covenants by the Company, including restrictions on transfers of intellectual property related to Afrezza. The Milestone Rights are subject to acceleration in the event the Company transfers its intellectual property related to Afrezza in violation of the terms of the Milestone Agreement. The Company has initially recorded the Milestone Rights at their estimated fair value.

~~Security Agreement~~ — In connection with the Facility Agreement, the Company and its subsidiary, MannKind LLC, entered into a Guaranty and Security Agreement (the “Security Agreement”) with Deerfield and Horizon Santé FLML SÁRL (collectively, the “Purchasers”), pursuant to which the Company and MannKind LLC each granted the Purchasers a security interest in substantially all of their respective assets, including respective intellectual property, accounts receivables, equipment, general intangibles, inventory and investment property, and all of the proceeds and products of the foregoing. The Security Agreement includes customary covenants by the Company and MannKind LLC, remedies of the Purchasers and representations and warranties by the Company and MannKind LLC. The security interests granted by the Company and MannKind LLC will terminate upon repayment of the 2019 notes and Tranche B notes, if applicable, in full. The Company’s obligations under the Facility Agreement and the Milestone Agreement are also secured by the Company’s assets including property and equipment which have a carrying value of $27.4 million.

~~Embedded Derivatives~~ — The Company identified and evaluated a number of embedded features in the notes issued under the Facility Agreement to determine if they represented embedded derivatives that are required to be separated from the notes and accounted for as freestanding instruments. The Company analyzed the Tranche B notes and identified embedded derivatives which required separate accounting. All of the embedded derivatives were determined to have a ~~de minimis~~ ~~value as of September 30, 2017 and December 31, 2016.~~

~~Issuance of new 5.75% Convertible Senior Subordinated Exchange Notes Due 2018 in Exchange for 2015 Notes~~ — As of September 30, 2017, the 5.75% Convertible Senior Subordinated Exchange Notes Due 2018 (the “2018 notes”) were the Company’s general, unsecured, senior obligations. Subsequently, on October 23, 2017, the 2018 notes were exchanged for new 5.75% Convertible Senior Subordinated Exchange Notes due 2021 (the “2021 notes”) and a specified number of shares of common stock as described in Note 15 – Subsequent Events. The 2018 notes ranked equally in right of payment with the Company’s other unsecured senior debt. The 2018 notes bore interest at the rate of 5.75% per year on the principal amount, payable semiannually in arrears in cash on February 15 and August 15 of each year, beginning February 15, 2016, with interest accruing from August 15, 2015. The 2018 notes would have matured on August 15, 2018. Accrued interest related to these notes is recorded in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets.

The 2018 notes were convertible, at the option of the holder, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at an initial conversion rate of 29 shares per $1,000 principal amount of 2018 notes, which was the initial conversion rate as defined in the agreement. The conversion rate was subject to adjustment under certain circumstances described in an indenture governing the 2018 notes dated August 10, 2015 with US Bank (as successor trustee to Wells Fargo, National Association), including in connection with a make-whole fundamental change. If certain fundamental changes had occurred, the Company would be obligated to pay a make-whole premium on any 2018 notes converted in connection with such fundamental change by increasing the conversion rate on such 2018 notes. If the Company underwent certain fundamental changes, except in certain circumstances, each holder of 2018 notes would have had the option to require the Company to repurchase all or any portion of that holder’s 2018 notes. The fundamental change repurchase price would have been 100% of the principal amount of the 2018 notes to be repurchased plus accrued and unpaid interest, if any.

On or after the date that is one year following the original issue date of the 2018 notes, the Company would have had the right to redeem for cash all or part of the 2018 notes if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for 20 or more trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date of the redemption notice. The redemption price was equal the sum of 100% of the principal amount of the 2018 notes to be redeemed, plus accrued and unpaid interest. Under the terms of the indenture, the conversion option could have been net-share settled and the maximum number of shares that could have been required to be delivered under the indenture, including the make-whole shares, was fixed and less than the number of authorized and unissued shares less the maximum number of shares that could have been required to be delivered during the term of the 2018 notes under existing commitments. Applying the Company’s sequencing policy, the Company performed an analysis at the time of the offering of the 2018 notes and each reporting date since and concluded that the

number of available authorized shares at the time of the offering and each subsequent reporting date was sufficient to deliver the number of shares that could have been required to be delivered during the term of the 2018 notes under existing commitments.

The 2018 notes provided that upon an acceleration of certain indebtedness, including the 2019 notes and the Tranche B notes issued to Deerfield pursuant to the Facility Agreement, the holders may elect to accelerate the Company’s repayment obligations under the notes if such acceleration is not cured, waived, rescinded or annulled.

The Company incurred approximately $0.8 million in issuance costs, which are recorded as an offset to the 2018 notes, in the accompanying condensed consolidated balance sheets. These costs are being accreted to interest expense using the effective interest method over the term of the 2018 notes.

~~Amortization of the premium and accretion of debt issuance costs related to the 2018 notes for the three and nine months ended September 30, 2017 and 2016 are as follows:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Amortization of debt premium

$
62

$
59

$
182

$
174

Accretion expense - debt issuance cost

$
70

$
65

$
204

$
190

~~7. Collaboration Arrangements~~

~~Receptor Collaboration and License Agreement~~ — On January 20, 2016, the Company entered into a Collaboration and License Agreement (the “CLA”) with Receptor Life Sciences, Inc. (“Receptor”) pursuant to which the Company performed initial formulation studies on compounds identified by Receptor and Receptor obtained the option to acquire an exclusive license to develop, manufacture and commercialize certain products that use the Company’s technology to deliver the compounds via oral inhalation.

The Company received $0.4 million in nonrefundable payments in 2016 prior to Receptor exercising the option. On December 30, 2016, following successful completion of the studies, Receptor exercised its option and paid the Company a $1.0 million nonrefundable option exercise and license fee. Under the CLA, the Company may receive the following additional payments:

~~Nonrefundable milestone payments upon the completion of certain technology transfer activities and the achievement of specified sales targets;~~

~~Royalties upon Receptor’s and its sublicensees’ sale of the product; and~~

~~Milestones upon total worldwide sales reaching certain agreed upon levels.~~

The Company evaluated the accounting for the payments received in 2016 under the multiple element accounting guidance and determined that the $0.4 million in payments received prior to Receptor exercising its option are separable from the other elements of the agreement and represented payments to offset costs incurred. Therefore, those payments reduced the Company’s research and development expense in 2016. The $1.0 million license fee received in 2016 does not have standalone value from the follow-on transfer of technology. Therefore, the license fee was recorded in deferred payments from collaboration as of December 31, 2016 and will be recognized in net revenue — collaboration over four years. Recognized revenue related to this license agreement amounted to $0.1 million and $0.2 for the three and nine months ended September 30, 2017. See Note 1 — Description of Business and Summary of Significant Accounting Policies for additional information on the Company’s accounting for multiple element arrangements.

On March 15, 2017, the Company entered into a Manufacturing and Supply Agreement with Receptor pursuant to which the Company will provide certain raw materials to Receptor. On March 16, 2017, the Company agreed to provide certain additional research and formulation consulting services to Receptor.

~~Sanofi License Agreement and Sanofi Supply Agreement~~ — On August 11, 2014, the Company entered into a license and collaboration agreement with Sanofi (“Sanofi License Agreement”), pursuant to which Sanofi was responsible for global commercial, regulatory and development activities for Afrezza. The Company manufactured Afrezza at its manufacturing facility in Danbury, Connecticut to supply Sanofi’s demand for the product pursuant to a supply agreement dated August 11, 2014 (the “Sanofi Supply Agreement”).

During the term of the Sanofi License Agreement, worldwide profits and losses were determined based on the difference between the net sales of Afrezza and the costs and expenses incurred by the Company and Sanofi that were specifically attributable or related to the development, regulatory filings, manufacturing, or commercialization of Afrezza. These profits and losses were shared 65% by Sanofi and 35% by the Company. On January 4, 2016, the Company received a 90-day notification from Sanofi of its election to

terminate in its entirety the Sanofi License Agreement. The effective date of termination was April 4, 2016. On April 5, 2016, the Company assumed responsibility for the worldwide development and commercialization of Afrezza from Sanofi. Under the terms of the transition agreement, Sanofi continued to fulfill orders for Afrezza in the United States until the Company began distributing MannKind-branded Afrezza product to major wholesalers during the week of July 25, 2016.

The Company analyzed the agreements entered into with Sanofi at their inception and determined that prior to December 31, 2015, because the Company did not have the ability to estimate the amount of costs that would potentially be incurred under the loss share provision related to the Sanofi License Agreement and the Sanofi Supply Agreement, the Company recorded the $150.0 million up-front payment and the two milestone payments of $25.0 million each as deferred payments from collaboration. In addition, as of December 31, 2015, the Company had recorded $17.5 million in Afrezza product shipments to Sanofi as deferred sales from collaboration and recorded $13.5 million as deferred costs from collaboration. Deferred costs from collaboration represented the costs of product manufactured and shipped to Sanofi, as well as certain direct costs associated with a firm purchase commitment entered into in connection with the collaboration with Sanofi.

During the three months ended September 30, 2016, Sanofi provided information to the Company to enable it to reasonably estimate the remaining costs under the Sanofi License Agreement and the Sanofi Supply Agreement. Accordingly, the fixed or determinable fee requirement for revenue recognition was met and there were no future obligations to Sanofi. Therefore, the Company recognized $172.0 million of net revenue — collaboration for the year ended December 31, 2016. The revenue recognized includes the upfront payment of $150.0 million and the two milestone payments of $25.0 million each, net of $64.9 million of net loss share with Sanofi, as well as $17.5 million in sales of Afrezza and $19.4 million from sales of bulk insulin, both to Sanofi. These payments and sales were made pursuant to the contractual terms of the agreements with Sanofi.

~~Sanofi Loan Facility~~ — On September 23, 2014, the Company entered into a senior secured revolving promissory note and a guaranty and security agreement (collectively, the “Sanofi Loan Facility”) with an affiliate of Sanofi, which provided the Company with a secured loan facility of up to $175.0 million to fund the Company’s share of net losses under the Sanofi License Agreement.

Advances under the Sanofi Loan Facility bore interest at a rate of 8.5% per annum and were payable in-kind and compounded quarterly and added to the outstanding principal balance under the Sanofi Loan Facility. The Company was required to make mandatory prepayments on the outstanding loans under the Sanofi Loan Facility from its share of any profits (as defined in the Sanofi License Agreement) under the Sanofi License Agreement within 30 days of receipt of its share of any such profits.

The Company’s total portion of the loss sharing was $57.7 million for the year ended December 31, 2015, of which $44.5 million was borrowed under the Sanofi Loan Facility as of December 31, 2015. Subsequent to December 31, 2015, the Company borrowed $17.9 million under the Sanofi Loan Facility to finance the portion of the Company’s loss for the quarters ended December 31, 2015 and March 31, 2016. The total amount owed to Sanofi at September 30, 2016 was $71.2 million, which included $5.8 million of paid-in-kind interest.

On November 9, 2016, the Company entered into a settlement agreement with Sanofi (the “Settlement Agreement”). Under the terms of the Settlement Agreement, the promissory note between the Company and Aventisub LLC, a Sanofi affiliate, was terminated, with Aventisub agreeing to forgive the full outstanding loan balance of $72.0 million. Sanofi also agreed to purchase $10.2 million of insulin from the Company in December 2016 under an existing insulin put option as well as make a cash payment of $30.6 million to the Company in early January 2017 as acceleration and in replacement of all other payments that Sanofi would otherwise have been required to make in the future pursuant to the insulin put option, without the Company being required to deliver any insulin for such payment. The Company was also relieved of its obligation to pay Sanofi $0.5 million in previously uncharged costs pursuant to the Sanofi License Agreement. The Company and Sanofi also agreed to a general release of potential claims against each other.

The settlement was accounted for in the year ended December 31, 2016, except for a $30.6 million cash payment received under the insulin put option agreement which reduced the receivable from Sanofi in the firstthird quarter of ~~2017.~~

~~8. Sale of Intellectual Property~~

~~On April 12, 2017 the Company~~ ~~entered~~ ~~into an~~ ~~agreement~~ ~~to sell certain oncology assets~~2023. (See Note 8 – Accrued Expenses and ~~patents to Fosun. Fosun~~ ~~paid~~ ~~the Company a~~ ~~one-time~~ ~~nonrefundable~~ ~~payment~~ ~~of $0.6 million net of taxes in June 2017~~ Other Current Liabilities and is required to pay royalties on net sales of products by Fosun and its affiliates and other consideration based on revenues from any licensees. The Company determined that the sale of the assets did not constitute a business and accordingly accounted for the transaction as a sale of assets. The Company evaluated the accounting for the payments received in 2017 under the multiple element accounting guidance and recorded the $0.6 million in payments received in revenueNote 9 – other in the accompanying condensed consolidated financial statements during the second quarter of 2017 as the deliverables under the agreement were substantially delivered as of June 30, 2017. See Note 1 — Description of Business and Summary of Significant Accounting Policies for additional information on the Company’s accounting forBorrowings.)

multiple element arrangements. The Company also evaluated the accounting for royalties and other consideration in the agreement. Since the amount of product that Fosun will ultimately be able to sell upon successfully utilizing this technology is uncertain, no royalty revenue will be recognized until such time when Fosun or its affiliates sell product to a third party and royalties are due to the Company.

— The Company applies various valuation approaches in determining the fair value of its financial assets and liabilities within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 2—2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Income Taxes — The provisions for federal, foreign, state and local income taxes are calculated on pre-tax income based on current tax law and include the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce net deferred income tax assets to amounts that are ~~unobservable.~~more likely than not to be realized.

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. Penalties, if probable and reasonably estimable, are recognized as a component of income tax expense. The Company has reduced its deferred tax assets for uncertain tax positions but has not recorded liabilities for income tax expense, penalties, or interest.

Contingencies — The Company records a loss contingency for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These accruals represent management’s best estimate of probable loss. Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. On a quarterly basis, the Company reviews the status of each significant matter and assesses its potential financial exposure. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation and may revise its estimates.

Stock-Based Compensation — Share-based payments to employees, including grants of restricted stock units ("RSUs,") performance-based non-qualified stock options awards (“PNQs”), restricted stock units with market conditions (“Market RSUs”), options and the compensatory elements of employee stock purchase plans, are recognized in the condensed consolidated statements of operations based upon the fair value of the awards at the grant date. RSUs are valued based on the market price on the grant date. Market RSUs are valued using a Monte Carlo valuation model and RSUs with performance conditions are evaluated for the probability that the performance conditions will be met and estimates the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period. The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options and the compensatory elements of employee stock purchase plans.

Net Income (Loss) Per Share of Common Stock — Basic net income or loss per share excludes dilution for potentially dilutive securities and is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted net income or loss per share reflects the potential dilution under the treasury method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For periods where the Company has presented a net loss, potentially dilutive securities are excluded from the computation of diluted net loss per share as they would be anti-dilutive.

Recently Issued Accounting Standards — From time to time, new accounting pronouncements are issued by the 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.

2. Acquisition

In May 2022, the Company purchased certain assets and assumed certain liabilities associated with the V-Go wearable insulin delivery device from Zealand Pharma A/S and Zealand Pharma US, Inc. (together “Zealand”).

Under the terms of the agreement with Zealand, the Company paid up-front consideration of $15.3 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 purchase consideration for V-Go was as follows (in thousands):


Fair value of consideration:	Amount
Cash consideration	$	15,341
Fair value of contingent consideration(1)		610
Total	$	15,951

____________________________

(1)

Subsequent changes in the fair value are reported in general and administrative expenses. As of June 30, 2023, the fair value of the contingent milestone liability was $0.6 million. The fair value of the contingent milestone liability as of December 31, 2022 was consistent with the fair value on the acquisition date.

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 3.92%, dividend yield of 0%, volatility of 43%, period of 15 years and credit risk of 17%.

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. In May 2023, the Company finalized the fair value for assets acquired and liabilities assumed for V-Go.

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 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. The Company 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 information below reflects the amounts of identifiable assets acquired and liabilities assumed as of May 31, 2023 (in thousands):


	Amount
Assets:
Inventory(1)	$	11,152
Property and equipment		2,921
Goodwill(1)		1,931
Intangible asset - Developed technology		1,200
Operating lease right-of-use assets		1,812
Total assets		19,016
Liabilities:
Liabilities assumed(1)		1,253
Operating lease liability		1,812
Total liabilities		3,065
Net assets acquired	$	15,951

___________________________

(1)

Through May 2023, goodwill related to the acquisition of V-Go was adjusted for a reduction in rebate-related liabilities partially offset by a reserve for inventory obsolescence.

There were no acquisition-related costs incurred during the three and six months ended June 30, 2023.

Supplemental Pro Forma Information (unaudited)

For the three and six months ended June 30, 2023, net revenue for V-Go was $4.8 million and $10.0 million, respectively, and loss from operations was $0.5 million and $1.5 million, respectively. For each of the three and six month periods ended June 30, 2022, net revenue and loss from operations for V-Go was $2.1 million and $0.3 million, respectively.

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition had occurred on January 1, 2022 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net revenue	$	48,611		$	24,992		$	89,237		$	43,082
Net loss		(5,265	)		(28,763	)		(15,060	)		(54,505	)
Net loss per share - basic and diluted		(0.02	)		(0.11	)		(0.06	)		(0.22	)

These pro forma amounts have been calculated by applying the Company’s accounting policies assuming transaction costs had been incurred beginning January 1, 2022. 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.

3. Investments

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.

Available-for-Sale Investment — The Thirona convertible notes are classified as available-for-sale securities and are included in prepaid expenses and other current assets in the condensed consolidated balance sheets. Available-for-sale investments are subsequently measured at fair value with realized gains and losses reported in other income (expense) in the condensed consolidated statements of operations. Unrealized holding gains and losses are excluded from earnings and reported in other comprehensive income until realized. The Company determines fair value of its available-for-sale investments using level 3 inputs. The Company evaluates the fair value of its investment in Thirona by applying a Monte Carlo simulation model. For the three and six months ended June 30, 2023, the Company recognized $0.1 million and $0.2 million, respectively, of interest income on investment and $0.1 million and $0.2 million of interest income on investment, respectively, for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, the fair value of the Company's investment in Thirona was $8.4 million and $7.1 million, respectively. For the three and six months ended June 30, 2023, the Company recognized a gain of $0.9 million on its investment in Thirona as a result of the recovery of a temporary impairment, as well as an unrealized holding gain of $0.4 million.

Held-to-Maturity Investments — Investments consist of highly liquid investments that are intended to facilitate liquidity and capital preservation. The amortization or accretion of the Company’s investments is recognized as interest income in the condensed consolidated statements of operations. For the three and six months ended June 30, 2023, the Company recognized $1.0 million and $2.2 million, respectively, of interest income on investments and $0.4 million, for each respective period, 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, respectively, of interest income on investments, and $0.2 million and $0.5 million, respectively, of amortization on certain investments. No allowance for credit losses on held-to-maturity securities was required as of June 30, 2023.

The contractual maturities of the Company’s held to maturity investments are summarized below (in thousands):


	June 30, 2023				December 31, 2022
	Amortized Cost Basis		Aggregate Fair Value		Amortized Cost Basis		Aggregate Fair Value
Due in one year or less(1)	$	133,088	$	132,864	$	152,862	$	156,976
Due after one year through five years		2,282		2,258		1,961		1,948
Total	$	135,370	$	135,122	$	154,823	$	158,924

___________________________

(1)

The investments due in one year or less include cash equivalents of $74.9 million as of June 30, 2023 and $51.8 million as of December 31, 2022.

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


	June 30, 2023
	Investment Level	Amortized Cost (Carrying Value)		Gross Unrealized Holding Gains (Losses)			Estimated Fair Value
Commercial bonds and paper	Level 2	$	46,369	$	(108	)	$	46,261
Money market funds	Level 1		73,479		6			73,485
U.S. Treasuries	Level 2		15,522		(146	)		15,376
Total cash equivalents and investments			135,370		(248	)		135,122
Less: cash equivalents			74,925		—			74,925
Total Investments		$	60,445	$	(248	)	$	60,197


	December 31, 2022
	Investment Level	Amortized Cost (Carrying Value)		Gross Unrealized Holding Gains (Losses)			Estimated Fair Value
Commercial bonds and paper	Level 2	$	66,762	$	(594	)	$	66,168
Money market funds	Level 1		51,783		—			51,783
U.S. Treasuries	Level 2		36,278		(587	)		35,691
Total cash equivalents and investments			154,823		(1,181	)		153,642
Less: cash equivalents			51,783		—			51,783
Total Investments		$	103,040	$	(1,181	)	$	101,859

As of June 30, 2023, there was $0.2 million of amounts receivable included in our condensed consolidated balance sheets as prepaid expenses and other current assets, which consisted of a de minimis amount of accrued interest receivable and $0.2 million of amount receivable on matured investment. As of December 31, 2022, there was $0.6 million of accrued interest receivable and $5.1 million of amount receivable on matured investment.

4. Accounts Receivable

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


	June 30, 2023			December 31, 2022
Accounts receivable – commercial
Accounts receivable, gross	$	20,078		$	19,359
Wholesaler distribution fees and prompt pay discounts		(3,319	)		(2,536	)
Reserve for returns		(4,316	)		(4,108	)
Total accounts receivable – commercial, net		12,443			12,715
Accounts receivable – collaborations and services		15,346			4,086
Total accounts receivable, net	$	27,789		$	16,801

As of June 30, 2023 and December 31, 2022, the allowance for doubtful accounts for commercial accounts receivable was de minimis. The Company had three wholesale distributors representing approximately 78% of commercial accounts receivable as of June 30, 2023 and approximately 71% of gross sales for each of the three and six months ended June 30, 2023. As of December 31, 2022, the Company had three wholesale distributors representing approximately 79% of commercial accounts receivables.

As of June 30, 2023 and December 31, 2022, there was no allowance for credit losses for accounts receivable for collaborations and services. The Company had one collaboration partner, UT, that comprised 100% of the collaboration and services net accounts receivable as of June 30, 2023 and December 31, 2022 and approximately 100% of gross revenue from collaborations and services for the three and six months ended June 30, 2023.

5. Inventories

Inventories consist of the following (in thousands):


	June 30, 2023		December 31, 2022
Raw materials	$	5,859	$	5,739
Work-in-process		10,698		13,815
Finished goods		8,733		2,218
Total inventory	$	25,290	$	21,772

Work-in-process and finished goods as of June 30, 2023 and December 31, 2022 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 2016. Raw materials inventory included $0.8 million of pre-launch inventory as of June 30, 2023 and December 31, 2022, which consisted of FDKP received in November 2019. The Company expects to request approval from the FDA for the new source of FDKP in 2024.

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 as of June 30, 2023 and December 31, 2022. 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. As a result of this assessment, there was an inventory write-off of $1.0 million and $3.4 million for the three and six months ended June 30, 2023, respectively. 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.

6. Property and Equipment

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


	Estimated Useful
	Life (Years)		June 30, 2023			December 31, 2022
Land		—	$	875		$	875
Buildings	39-40			17,389			17,389
Building improvements	5-40			43,527			38,952
Machinery and equipment	3-15			58,905			58,542
Furniture, fixtures and office equipment	5-10			2,976			2,976
Computer equipment and software		3		8,646			8,246
Construction in progress		—		37,412			16,706
Total property and equipment				169,730			143,686
Less accumulated depreciation				(100,220	)		(98,560	)
Total property and equipment, net			$	69,510		$	45,126

Depreciation expense related to property and equipment was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Depreciation Expense	$	1,095	$	727	$	2,133	$	1,326

In November 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”). The sale of the Property and subsequent lease did not result in the transfer of control of the Property to the Purchaser; therefore, the Sale-Leaseback Transaction qualified as a failed sale leaseback transaction whereby the lease is accounted for as a finance lease and the Property remains as a long-lived asset of the Company and is depreciated at its remaining useful life of 20 years or less. See Note 15 – Commitments and Contingencies.

7. 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 $1.9 million and $2.4 million as of June 30, 2023 and December 31, 2022, respectively, as a result of the Company's acquisition of V-Go in May 2022. Through May 2023, goodwill related to the acquisition of V-Go was adjusted for a reduction in rebate-related liabilities partially offset by a reserve for inventory obsolescence. 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		June 30, 2023							December 31, 2022
	Useful Life (Years)		Cost		Accumulated Amortization			Net Book Value		Cost		Accumulated Amortization			Net Book Value
Developed technology		15	$	1,200	$	(87	)	$	1,113	$	1,200	$	(47	)	$	1,153

Amortization expense related to the other intangible asset was de minimis for the six months ended June 30, 2023.

The estimated annual amortization expense for the other intangible asset for the years ended December 31, 2023 through 2027 will be approximately $0.1 million per year and $0.6 million, thereafter.

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.

8. Accrued Expenses and Other Current Liabilities

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


	June 30, 2023		December 31, 2022
Salary and related expenses	$	12,140	$	14,906
Discounts and allowances for commercial product sales		10,153		8,504
Accrued interest(1)		6,267		2,201
Current portion of milestone rights liability(2)		1,676		924
Deferred lease liability		944		1,304
Professional fees		818		1,136
Returns reserve for acquired product		633		1,013
Danbury facility buildout		93		846
Other		4,109		4,719
Accrued expenses and other current liabilities	$	36,833	$	35,553

_________________________

(1)

As of June 30, 2023, accrued interest includes $4.1 million related to a milestone payment of $5.0 million to be paid in the third quarter of 2023.

(2)

As of June 30, 2023, the current portion of milestone rights liability includes $0.9 million to be paid in the third quarter of 2023 and $0.8 million reclassed from long-term to short-term milestone right liability.

9. Borrowings

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


	June 30, 2023		December 31, 2022
Senior convertible notes	$	226,124	$	225,397
MidCap credit facility		39,478		39,264
Mann Group convertible note		8,829		8,829
Total debt – net carrying amount	$	274,431	$	273,490

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

Amount Due

Terms

June 30, 2023

December 31, 2022

Annual Interest
Rate

Maturity Date

Conversion Price

Senior convertible notes

$230.0 million

2.50%

March 2026

$5.21
per share

MidCap credit facility(1)

$40.0 million

one-month
SOFR
(1% floor)
plus 6.25%;
cap of 8.25%

)

August 2025

)

N/A

Mann Group convertible note

$8.8 million

2.50%

December 2025

$2.50
per share

_________________________

(1)

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 maturities of the Company’s borrowings as of June 30, 2023 are as follows (in thousands):


	Amounts
2023	$	6,667
2024		20,000
2025		22,163
2026		230,000
Total principal payments		278,830
Unamortized discount		(521	)
Debt issuance costs		(3,878	)
Total debt	$	274,431

Senior convertible notes – In March 2021, the Company issued $230.0 million aggregate principal amount of Senior convertible notes in a private offering. The Senior convertible notes were issued pursuant to an indenture, dated March 4, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.

The Senior convertible notes are general unsecured obligations of the Company and will mature on March 1, 2026, unless earlier converted, redeemed or repurchased. The Senior convertible notes will bear cash interest from March 4, 2021 at an annual rate of 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021. The Senior convertible notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, par value $0.01 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Senior convertible notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Senior convertible notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (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; or (4) upon the occurrence of specified corporate events as set forth in the Indenture. 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 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). The initial conversion price of the Senior convertible notes represents a premium of approximately 30% to the last reported sale price of the common stock on the Nasdaq Global Market on March 1, 2021. The conversion rate for the Senior convertible notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date of the Senior convertible notes or if the Company delivers a notice of redemption in respect of the Senior convertible notes, the Company will, in certain circumstances, increase the conversion rate of the Senior

convertible notes for a holder who elects to convert its Senior convertible notes in connection with such a corporate event or convert its Notes called for redemption during the related redemption period (as defined in the Indenture), as the case may be.

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. No sinking fund is provided for the Senior convertible notes.

If the Company undergoes a fundamental change (as defined in the Indenture), then, subject to certain conditions and except as described in the Indenture, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Senior convertible notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture includes customary covenants and sets forth certain events of default after which the Senior convertible notes may be declared immediately due and payable.

If certain bankruptcy and insolvency-related events of default involving the Company (and not just any of its significant subsidiaries) occur, 100% of the principal of and accrued and unpaid interest on the Senior convertible notes will automatically become due and payable. If an event of default with respect to the Senior convertible notes, other than certain bankruptcy and insolvency-related events of default involving the Company (and not just any of its significant subsidiaries), occurs and is continuing, the trustee, by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Senior convertible notes by notice to the Company and the trustee, may, and the trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Senior convertible notes to be due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company so elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 365 days after the occurrence of such an event of default consist exclusively of the right to receive additional interest on the Senior convertible notes as set forth in the Indenture.

The Indenture provides that the Company shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties and assets of the Company and its subsidiaries, taken as a whole, to, another person (other than any such sale, conveyance, transfer or lease to one or more of the Company’s direct or indirect wholly owned subsidiaries), unless: (i) the resulting, surviving or transferee person (if not the Company) is a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such corporation (if not the Company) expressly assumes by supplemental indenture all of the Company’s obligations under the Senior convertible notes and the Indenture; 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 March 2021 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, 2023, the unamortized debt issuance cost was $3.9 million.

MidCap credit facility — In 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”) 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 June 30, 2023, the unamortized debt discount was $0.2 million and the unamortized prepayment penalty was $0.4 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. 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 1.00% of principal prepaid.

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, 2023, the Company was in compliance with the financial covenant.

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. Upon an event of default, the agent and the lenders may declare all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the MidCap credit facility. During the existence of an event of default, interest on the term loans could be increased by 2.00%.

Mann Group convertible note — In August 2019, the Company issued a $35.0 million note that is convertible into shares of the Company’s common stock at $2.50 per share (the “Mann Group convertible note”) as part of a restructuring of its then existing indebtedness to Mann Group.

The Mann Group convertible note originally accrued interest at the rate of 7.00% per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter beginning October 1, 2019. In April 2021, the Company and Mann Group amended the Mann Group convertible note, pursuant to which the parties agreed to (i) reduce the interest rate from 7.0% to 2.5% effective on April 22, 2021, and (ii) extend the maturity date from November 3, 2024 to December 31, 2025.

The principal and any accrued and unpaid interest under the Mann Group convertible note may be converted, at the option of Mann Group, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 400 shares per $1,000 of principal and/or accrued and unpaid interest, which is equal to a conversion price of $2.50 per share. The conversion rate will be subject to adjustment under certain circumstances described in the Mann Group convertible note. Interest on the convertible note will be payable in kind by adding the amount thereof to the principal amount; 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 six months ended June 30, 2023, the Company paid interest on the Mann Group convertible note by issuing 23,683 shares of common stock. During the six months 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 the premium and accretion of debt issuance costs related to all borrowings were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Amortization of debt discount	$	108	$	106	$	214	$	212
Amortization of debt issuance cost		363		363		727		726

Milestone Rights — As of June 30, 2023 and December 31, 2022, the remaining Milestone Rights liability balance was $4.8 million, which was based on initial fair value estimates calculated using the income approach and reduced by milestone achievement payments made. As of June 30, 2023 and December 31, 2022, the Milestone Rights liability consisted of $1.7 million of current liability which was presented as accrued expenses and other current liabilities, and $3.2 million of long-term liability which was presented as milestone liabilities in our condensed consolidated balance sheets.

The Milestone Rights Agreement includes customary representations and warranties and covenants by the Company, including restrictions on transfers of intellectual property related to Afrezza. The Milestone Rights are subject to acceleration in the event the Company transfers its intellectual property related to Afrezza in violation of the terms of such agreement.

10. Collaboration, Licensing and Other Arrangements

Revenue from collaborations and services were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
UT CSA Agreement (1)	$	10,933	$	4,695	$	22,097	$	5,879
UT License Agreement (2)		242		698		427		1,556
Cipla License and Distribution Agreement		36		36		73		73
Vertice Pharma Co-Promotion Agreement		—		325		—		325
Other		—		114		—		201
Total revenue from collaborations and services	$	11,211	$	5,868	$	22,597	$	8,034

_________________________

(1)

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

(2)

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 Tyvaso DPI.

Total revenue from UT was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
UT Revenue
UT CSA Agreement	$	10,933	$	4,695	$	22,097	$	5,879
UT License Agreement		242		698		427		1,556
Royalties — Collaborations (1)		19,055		304		30,733		304
Total revenue from UT	$	30,230	$	5,697	$	53,257	$	7,739

_________________________

(1)

Amount consists of royalties associated with the UT License Agreement. The contract assets related to the royalties is included in prepaid expense and other current assets in the condensed consolidated balance sheets.

In October 2018, the Company and UT entered into the UT License Agreement for the collaboration and development of Tyvaso DPI. Pursuant to this agreement, the Company also receives low double-digit royalties on net sales of Tyvaso DPI as well as a manufacturing margin on commercial supplies of the product. In August 2021, the Company and UT entered into the CSA, pursuant to which the Company is responsible for manufacturing and supplying to UT, and UT is responsible for purchasing from the Company on a cost-plus basis. There have been various amendments to the UT License Agreement and the CSA since inception. The terms of the amendments and related accounting treatment are disclosed in the Company's Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.

In December 2022, the Company and UT agreed to fund an additional $39.5 million to support capital and continuous improvement activities and $2.3 million in the development of alternative manufacturing processes. The Company determined that the capital 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. The total revised anticipated cash flows of $722.3 million from the transaction was allocated to the three distinct performance obligations as follows (dollars in millions):

Anticipated

Cash Flow

Revenue Allocation

Recognition Method

Progress Measure

Revenue
Recognition

Total anticipated cash flow(1)

722.3

Distinct Performance Obligation

R&D Services and License

—

Over time

Ratably

Aug 2021 - Oct 2021

Next-Gen R&D Services

10.0

Over time

Input

% of completion of costs

Manufacturing Services and
Product Sales(2)

712.3

Point in time

Transfer of control

__________________________

(1)

The total anticipated cash flow includes a transaction price of $120.0 million for the contractual obligations under the CSA for the Manufacturing Services and the Next-Gen R&D Services performance obligations and $602.3 million for future supply of Tyvaso DPI over the remaining term of the CSA.

(2)

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 $220.8 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, 2023, deferred revenue consisted of $62.3 million, of which $3.3 million was classified as current and $59.0 million was classified as long-term on the condensed consolidated balance sheet. As of December 31, 2022, deferred revenue consisted of $37.9 million, of which $1.6 million was classified as current and $36.3 million was classified as long-term on the condensed consolidated balance sheet.

Thirona Collaboration Agreement — In June 2021, the Company and Thirona entered into a collaboration agreement to evaluate the therapeutic potential of Thirona’s compound for the treatment of pulmonary fibrosis. If initial studies are promising, the Company can exercise certain rights to seek a full license to the compound for clinical development and commercialization. The parties will perform their respective obligations and provide reasonable support for research, clinical development and regulatory strategy. The collaboration agreement was accounted for under ASC 808, Collaborative Agreements; however, no consideration was exchanged between the parties. The costs incurred by the Company were expensed as R&D in the condensed consolidated statements of operations. On February 28, 2023, the collaboration agreement was amended to extend the term through June 2024. In accordance with the amendment, the Company will fund a minimum of $1.1 million to be expended on a revised development plan prepared by Thirona.

Biomm Supply and Distribution Agreement — In May 2017, the Company and Biomm S.A. ("Biomm") entered into a supply and distribution agreement for the commercialization of Afrezza in Brazil. Under this agreement, Biomm was responsible for pursuing regulatory approvals of Afrezza in Brazil, including from the Agência Nacional de Vigilância Sanitária (“ANVISA”) and, with respect to pricing matters, from the Camara de Regulação de Mercado de Medicamentos (“CMED”), both of which were received. Biomm commenced product sales in January 2020. There were no shipments of product to Biomm in 2022 or the first six months of 2023.

Cipla License and Distribution Agreement — In May 2018, the Company and Cipla Ltd. (“Cipla”) entered into an exclusive agreement for the marketing and distribution of Afrezza in India and the Company received a $2.2 million nonrefundable license fee. Under the terms of the agreement, Cipla is responsible for obtaining regulatory approvals to distribute Afrezza in India and for all marketing and sales activities of Afrezza in India. The Company is responsible for supplying Afrezza to Cipla. The Company has the potential to receive an additional regulatory milestone payment, minimum purchase commitment revenue and royalties on Afrezza sales in India once cumulative gross sales have reached a specified threshold.

The nonrefundable licensing fee was recorded in deferred revenue and is being recognized in net revenue – collaborations over 15 years, representing the estimated period to satisfy the performance obligation. 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, 2023, the deferred revenue balance was $1.4 million, of which $0.1 million is classified as current and $1.3 million is classified as long term in the condensed consolidated balance sheets.

11. Fair Value of Financial Instruments

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. 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.

~~Cash Equivalents~~ ~~— Cash equivalents consist of highly liquid investments with original or remaining maturities of 90 days or less at~~ The Company uses the ~~time of purchase, that are readily convertible into cash. As of September 30, 2017 and December 31, 2016,~~exit price method for estimating the ~~Company held cash equivalents of $18.4 million and $20.5 million, respectively, comprised of money market funds. The~~ fair value of ~~these money market funds was determined by using~~loans for disclosure purposes. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

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

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical ~~investments~~or similar instruments in ~~an active market (Level 1~~markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

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

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

~~Note Payable~~due to ~~Principal Stockholder —~~their relatively short maturities. The fair value of the Senior convertible notes, MidCap credit facility, Mann Group convertible note, payable to principal stockholder cannot be reasonably estimated as the Company would not be able to obtain a similar credit arrangement in the current economic environment. Therefore the fair value is based upon carrying value.Milestone Rights liability and Financing liability are disclosed below.

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

As of September 30, 2017

Fair Value Measurements Using

Carrying Value

(Level 1)

(Level 2)

(Level 3)

Fair Value

Financial liabilities:

Senior convertible notes
$
27.7

$
—

$
—

$
24.7

$
24.7

Facility financing obligation

57.9

—

—

60.0

60.0

Milestone rights

8.9

—

—

18.7

18.7

Total financial liabilities
$
94.5

$
—

$
—

$
103.4

$
103.4


	June 30, 2023
			Fair Value
	Carrying Amount		Significant Unobservable Inputs (Level 3)
Financial liabilities:
Senior convertible notes(1)	$	226,124	$	241,904
MidCap credit facility(2)		39,478		41,721
Mann Group convertible note(3)		8,829		16,316
Milestone rights(4)		4,838		11,800
Contingent milestone liability(4)		610		610
Financing liability(5)		104,081		103,229

_________________________

As of December 31, 2016

Fair Value Measurements Using

Carrying Value

(Level 1)

(Level 2)

(Level 3)

Fair Value

Financial liabilities:

Senior convertible notes

$
27.6

$
—

$
—

$
22.9

$
22.9

Facility financing obligation

71.3

—

—

74.5

74.5

Milestone rights

8.9

—

—

18.4

18.4

Warrant liability (at recurring fair value)

7.4

—

—

7.4

7.4

Total financial liabilities
��
$
115.2

$
—

$
—

$
123.2

$
123.2

(1)

~~On May 12, 2016,~~Fair value was determined by applying a discounted cash flow analysis to the ~~Company issued certain warrants~~straight note with a hypothetical yield of 11%, volatility of 72.9% and a Monte Carlo simulation for the value of the conversion feature. A change in yield of + or – 2% would result in a fair value of ~~$12.8 million. On September 29, 2017 the Company~~$233.4 million and ~~four holders of 9.7~~$250.9 million, outstanding warrants entered into separate, privately-negotiated exchange agreements, pursuant to which the Company agreed to issue to such holders shares of the Company’s common stock (to be delivered on October 3, 2017) in exchange for such warrants. The warrant liability associated with the exchanged warrantsrespectively.

Contingent milestone liability — The acquisition of V-Go in May 2022 resulted in a contingent milestone liability which ~~require payments were~~could result in obligations to ~~be six months later than in~~ the ~~current forecast, the~~seller if certain revenue thresholds are met. The initial fair value of the contingent milestone liability ~~would decrease by 7%. If~~was recorded as an adjustment to the probabilities of meeting the milestones were to decrease by 5% or 10%, the fair value of the liability would decrease by 16% and 30%, respectively. Over the long term, these inputs are interrelated because if the Company’s performance improves, the timing of meeting the milestones would likely be earlier, the probability of making payments on the milestones would likely be higher and the discount rate would likely decrease, all of which would increase the fair value of the liability. The inverse is also true.

~~Warrant Liability —~~ Warrant liabilities were measured at fair value using a Monte Carlo pricing valuation model. The assumptions used in the valuation model for the common stock warrant liabilities were: (a) a risk-free interest rate based on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the remaining contractual term of the warrants; (b) an assumed

dividend yield of zero percent based on the Company’s expectation that it will pay no dividends in the foreseeable future; (c) an expected term based on the remaining contractual term of the warrants; (d) an expected volatility based upon the Company’s historical volatility over the remaining contractual term of the warrants; and (e) probability of a dilutive financing that may trigger a price protection clause. The significant unobservable input used in measuring the fair value of the common stock warrant liabilities is the expected volatility. Significant increases in volatility would result in a higher fair value measurement (Level 3purchase price. Subsequent changes in the fair value ~~hierarchy).~~are reported in general and administrative expenses. See Note 2 – Acquisition.

~~Embedded Derivatives~~Financing Liability — The ~~Company identified~~Sale-Leaseback Transaction in November 2021 resulted in a financing liability. See Note 15 – Commitments and ~~evaluated a~~Contingencies.

13.Earnings per Common Share (“EPS”)

Basic EPS excludes dilution for potentially dilutive securities and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution under the treasury method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For periods where the Company has presented a net loss, potentially dilutive securities are excluded from the computation of diluted EPS as they would be antidilutive.

The following tables summarize the components of the basic and diluted EPS computations (in thousands, except per share amounts):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
EPS — basic and diluted:
Net loss (numerator)	$	(5,265	)	$	(29,023	)	$	(15,060	)	$	(55,021	)
Weighted average common shares (denominator)		265,626			253,644			264,802			252,775
Net loss per share	$	(0.02	)	$	(0.11	)	$	(0.06	)	$	(0.22	)

Common shares issuable represents incremental shares of common stock which ~~360,200~~consist of ~~these~~RSUs, options, warrants, and shares that could be issued upon conversion of the Senior convertible notes and the Mann Group convertible notes.

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


	Six Months Ended June 30,
	2023		2022
Senior convertible notes		44,120,463		44,120,463
RSUs and Market RSUs(1)		16,951,734		15,848,183
Common stock options and PNQs		8,688,625		9,766,028
Mann Group convertible notes		3,370,000		3,370,000
Employee stock purchase plan		—		235,794
Total shares		73,130,822		73,340,468

__________________________

(1)

Market RSUs issued in 2021, 2022, and 2023 are included at the share delivery of 0%, 162%, and 100%, respectively, in accordance with a valuation assessment obtained as of June 30, 2023.

14. Stock-Based Compensation Expense

In May 2023, the Company’s stockholders, upon recommendation of the Company’s board of directors, approved an amendment to the Company’s 2018 Equity Incentive Plan (the "2018 Plan") to increase the number of shares of common stock that may be issued under the 2018 Plan by 25,000,000 shares.

During the six months ended June 30, 2023, the Company granted the following awards vest in four equal tranches upon the achievement of certain product sales targets. The remaining 40,100 options vest over a four year period. The grant date fair value of these awards is $0.4 million with(in shares):


	Three Months Ended March 31,			Three Months Ended June 30,			Six Months Ended June 30,
	2023			2023			2023
Employee awards:
RSUs		179,905	(1)		2,660,721	(2)		2,840,626
Market RSUs		—			1,445,000	(3)		1,445,000
Non-employee director RSUs		—			319,904	(4)		319,904
Total awards issued		179,905			4,425,625			4,605,530

_________________________

(1)

RSUs had a weighted average grant date fair value of ~~$1.06~~$4.16 per share, of which 91,900 RSUs had a cliff vesting period of three years, 42,000 RSUs had a cliff vesting period of two years, and 46,005 RSUs had a vesting period of 25% annually over four years.

(2)

RSUs had a weighted average grant date fair value of $4.56 per share, of which 2,598,971 RSUs had a vesting period of 25% annually over four years, and 61,750 RSUs had a cliff vesting period of 3 years.

(3)

Market RSUs had a grant date fair value of $9.40 per share and will vest on July 15, 2026 provided the closing price of the Company’s common stock on June 30, 2026 is not less than the closing price on July 1, 2023. 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 July 1, 2023 until July 30, 2026 relative to the TSR of the Russell 3000 Pharmaceutical & Biotechnology Index over the same three-year period, as ~~determined using~~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.

(4)

RSUs had a ~~Black-Scholes option pricing model.~~

weighted average grant date fair value of $4.55 per share and vested immediately upon the grant date; however, 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 ~~September~~June 30, ~~2017, there was $3.5 million, $3.9 million and $3.2 million of~~2023, unrecognized compensation expense related to restricted stock units, options with performance conditions and options that vest over the vesting period. The Company evaluates stock awards with performance conditions as the probability that the performance conditions will be met and uses that information to

~~estimate the date at which those performance conditions will be met in order to properly recognize~~ stock-based compensation expense was $0.2 million related to options and PNQs which is expected to be recognized over a weighted average period of 2.93 years as well as $24.0 million and $20.9 million related to RSUs

and Market RSUs, respectively, which is expected to be recognized over weighted average periods of approximately 2.73 and 2.07 years, respectively.

Total stock-based compensation expense recognized in the ~~requisite service~~condensed consolidated statements of operations as cost of goods sold, cost of revenue – collaborations and services, R&D, selling and general and administrative expense was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
RSUs and options	$	5,404	$	4,239	$	8,882	$	6,883
Employee stock purchase plan		176		183		353		345
Total	$	5,580	$	4,422	$	9,235	$	7,228

Employee Stock Purchase Plan

The Company provides all employees, including executive officers, the ability to purchase common stock at a discount under the Company’s 2004 the ESPP. The ESPP is designed to comply with Section 423 of the Internal Revenue Code and provides all employees with the opportunity to purchase up to $25,000 worth of common stock (based on the undiscounted fair market value at the commencement of the offering period) each year at a purchase price that is the lower of 85% of the fair market value of the common stock on either the date of purchase or the commencement of the offering period. An employee may not purchase more than 5,000 shares of common stock on any purchase date. The executives’ rights under the ESPP are the same as those of all other employees.

~~On a periodic basis and~~In May 2023, the Company’s stockholders, upon recommendation of the Company’s board of directors, approved an amendment to the Company’s ESPP to increase the number of shares of common stock authorized for issuance under the ESPP by an additional 3,000,000 shares.

There were approximately 3.1 million shares of common stock available for issuance under the ESPP as of ~~September~~June 30, 2017, the Company reviewed the probability of achieving the performance conditions for each of the four vesting tranches of the performance-based stock options that were granted during 2017 and in prior years and determined that it was probable that the Company would achieve the first vesting tranche in December 2017. Therefore, the Company recorded compensation expense related to performance-based stock options of $0.2 million and $0.9 million during the three and nine months ended September 30, 2017, respectively. The Company further determined that no compensation costs would be recognized for the second, third and fourth vesting tranches as the probability of achieving those performance conditions has not been determined.2023.

~~11.~~15. Commitments and Contingencies

Guarantees and Indemnifications — In the ordinary course of its business, the Company makes certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is ~~minimal. The Company~~minimal and therefore has not recorded any liability for these indemnities in the ~~accompanying~~ condensed consolidated balance sheets. ~~However, the~~The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount can be reasonably estimated. No such losses have been recorded to date.

Litigation — The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. As of ~~September~~June 30, ~~2017,~~2023, the Company believes that the final disposition of such matters will not have a material adverse effect on the ~~financial position,~~ results of operations, financial position, 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.

Following the public announcement of Sanofi’s election to terminate the Sanofi License Agreement and the subsequent decline in the Company’s stock price, two motions were submitted to the district court at Tel Aviv, Economic Department for the certification of a class action against the Company and certain of its officers and directors. In general, the complaints alleged that the Company and certain of its officers and directors violated Israeli and U.S. securities laws by making materially false and misleading statements regarding the prospects for Afrezza, thereby artificially inflating the price of its common stock. The plaintiffs are seeking monetary damages. In November 2016, the district court dismissed one of the actions without prejudice. In the remaining action, the district court recently ruled that U.S. law will apply to this case. The Company is in the process of preparing a response to the plaintiff’s motion to certify the case as a class action. The Company will vigorously defend against the claims advanced.

Contingencies — In ~~connection with the Facility Agreement, on~~ July 1, 2013, the Company ~~also~~ entered into a the Milestone Rights Agreement with the Original Milestone Purchasers, pursuant to which the Company ~~sold the Milestone Purchasers~~granted the Milestone Rights to receive payments up to ~~$90.0~~$90.0 million upon the occurrence of specified strategic and sales milestones, ~~including~~$60.0 million of which remains payable to the Milestone Purchasers upon achievement of such milestones (see Note 9 – Borrowings).

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. The total annual rent under the Lease starts at approximately $9.5 million per year, subject to a 50% rent

abatement during the first ~~commercial sale~~year of ~~an Afrezza product~~the Lease, and will increase annually by (i) 2.5% in the ~~United States~~second through fifth year of the Lease and (ii) 3% in the sixth and each subsequent year of the Lease, including any renewal term. The Company is responsible for payment of operating expenses, property taxes and insurance for the Property. The Purchaser will hold a security deposit of $2.0 million during the Lease term. Pursuant to the terms of the Lease, the Company has four options to repurchase the Property, in 2026, 2031, 2036 and 2041, for the greater of (i) $102.3 million and (ii) the fair market value of the Property.

Effective with the closing of the Sale-Leaseback Transaction, the Company and the ~~achievement~~Purchaser also entered into a right of ~~specified net sales figures (see Note 6 – Borrowings).~~first refusal agreement (the “ROFR”), pursuant to which the Company has a right to re-purchase the Property from the Purchaser in accordance with terms and conditions set forth in the ROFR. Specifically, if the Purchaser receives, and is willing to accept, a bona fide purchase offer for the Property from a third-party purchaser, the Company has certain rights of first refusal to purchase the Property on the same material terms as proposed in such bona fide purchase offer.

As of June 30, 2023, the related financing liability was $104.1 million, which was recognized in the condensed consolidated balance sheet and of which $94.4 million was long-term and $9.7 million was current. As of December 31, 2022, the related financing liability was $104.1 million, of which $94.5 million was long-term and $9.6 million was current.

Financing liability information was as follows:


	June 30, 2023			December 31, 2022
Weighted average remaining lease term (in years)		18.3			18.8
Weighted average discount rate		9.0	%		9.0	%


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest expense on financing liability	$	2,449	$	2,443	$	4,873	$	4,814

The Company's remaining financing liability payments were as follows (in thousands):


	June 30, 2023
2023	$	4,906
2024		10,018
2025		10,269
2026		10,533
2027		10,849
Thereafter		188,453
Total		235,028
Interest payments		(128,166	)
Debt issuance costs		(2,781	)
Total financing liability	$	104,081

Commitments — OnIn July ~~31,~~ 2014, the Company entered into ~~a supply agreement (the “Insulin~~the Insulin Supply ~~Agreement”)~~Agreement with Amphastar ~~France Pharmaceuticals S.A.S., a French corporation (“Amphastar”),~~ pursuant to which Amphastar manufactures for and supplies to the Company certain quantities of recombinant human insulin for use in Afrezza. Under the terms of the Insulin Supply Agreement, Amphastar is responsible for manufacturing the insulin in accordance with the Company’s specifications and agreed-upon quality standards.

~~On November 9, 2016,~~In May 2021, the ~~supply agreement with~~Company and Amphastar ~~was~~ amended the Insulin Supply Agreement to extend the term ~~over which~~and restructure the Company is required to purchase insulin, without reducing the total amount of insulin to be purchased. Under the amendment, annual minimum quantities of insulin to be purchased for calendar years 2017 through 2023 total an aggregate purchase price of €93.0 million at September 30, 2017. The Insulin Supply Agreement specifies that Amphastar will be deemed to have satisfied its obligations with respect to quantity, if the actual quantity supplied is within plus or minus ten percent (+/- 10%) of the quantity set forth in the applicable purchase order. In addition, the aggregate cancellation fees that the Company would incur in the event that certain insulin quantities are not purchased was lowered from $5.3 million for the period October 1, 2016 through 2018 to $3.4 million over the same period. The Company has not yet purchased any insulin under the amended agreement in 2017. The annual purchase ~~requirements under~~commitments. The Company's remaining purchase commitments were as follows (€ in millions):


	June 30, 2023
2023		4.8
2024		14.6
2025		15.5
2026		19.4
2027		9.2

~~Unless earlier terminated,~~amendment, the term of the Insulin Supply Agreement ~~with Amphastar~~ expires on December 31, ~~2023~~2027, unless terminated earlier, and can be renewed for additional, successive ~~two year~~two-year terms upon 12 months’ written notice given prior to the end of the initial term or any additional ~~two year~~two-year term. The Company and Amphastar each have normal and customary termination rights, including

termination for a material breach that is not cured within a specific time frame or in the event of liquidation, bankruptcy or insolvency of the other party. In addition, the Company may terminate the Insulin Supply Agreement upon two years’ prior written notice to Amphastar without cause or upon 30 days’ prior written notice to Amphastar if a controlling regulatory authority withdraws approval for Afrezza, provided, however, in the event of a termination pursuant to either of the latter two scenarios, the provisions of the Insulin Supply Agreement require the Company to pay the full amount of all unpaid purchase commitments due over the initial term within 60 calendar days of the effective date of such termination.

~~At September 30, 2017,~~Vehicle Leases — During the second quarter of 2018, the Company ~~has other firm commitments~~entered into a master lease agreement with ~~suppliers for an aggregate~~Enterprise Fleet Management Inc. The monthly payment inclusive of ~~$0.5~~maintenance fees, insurance and taxes is approximately $0.1 million.

~~Warrants~~ ~~- In May 2016, the Company sold~~ The lease expense is included in a registered offering an aggregate of 9,708,737 shares of common stock together with Series A Common Stock Purchase Warrants (“A Warrants”) exercisable for up to an aggregate of 7,281,553 shares of common stock and Series B Common Stock Purchase Warrants (“B Warrants”) exercisable for up to an aggregate of 2,427,184 shares of common stock with a total fair value of $44.7 million. Each of the warrants had an exercise price of $7.50 per share. The A Warrants became exercisable upon issuance and had an expiration date of May 2018. The B Warrants became exercisable beginning in May 2017 and had an expiration date of November 2018. The shares of common stock and the warrants were immediately separable and issued separately.

~~The Company determined that the A Warrants required liability classification primarily due to a price-protection clause that applied~~selling expenses in the ~~event~~condensed consolidated statements of certain dilutive financings. The fair value of the A Warrants was recorded as warrant liability in the consolidated balance sheet at issuance and was adjusted to fair value at each reporting period while outstanding. The Company determined that the B Warrants met the criteria for equity classification and accounted for such warrants in additional paid in capital.operations.

On September 29, 2017, the Company and the four holders of all outstanding A Warrants and B Warrants entered into separate, privately-negotiated exchange agreements, pursuant to which the Company agreed to issue to such holders an aggregate of 1,292,510 shares of the Company’s common stock (to be delivered October 3, 2017) in exchange for such warrants. The Company evaluated the obligation to deliver shares and determined that it met the criteria to be classified in equity. As a result, on September 29, 2017, the warrant liability was adjusted to $1.9 million, the fair value of the remaining obligation, and that amount was reclassified into equity. The closing of the foregoing exchange was completed on October 3, 2017.

Office ~~Lease~~Leases — OnIn May 5, 2017, the Company executed an office lease with Russell Ranch Road II LLC ~~to lease office space~~ for the Company’s corporate ~~headquarters~~offices in Westlake Village, ~~California. The office lease commenced~~California, which was renewed in ~~August 2017. The lease requires~~April 2022. Pursuant to the renewal, the monthly payments of ~~$40,951, increased by 3% annually,~~$79,543 began in February 2023, subject to 3% annual increases, plus the estimated cost of maintaining the property and common areas by the landlord, ~~with~~and further subject to a ~~five month~~six-month base rent concession ~~from September 2017 through January 2018.~~beginning February 2023. The Company is also entitled to a one-time allowance up to $0.9 million as reimbursement for tenant improvements or the purchase of furniture, fixtures or equipment. Of the $0.9 million allowance, an amount up to $0.7 million may be applied as an additional base rent concession. The Company has no further right to extend the lease ~~expires December~~term beyond July 31, 2028.

In May 2022, ~~and provides~~ the Company assumed certain leased real property (the “Marlborough Lease”) in connection with the V-Go acquisition. The Marlborough Lease pertains to certain premises in a ~~five year renewal option. Future~~building located in Marlborough, Massachusetts. The monthly payments of $28,895 began 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 is manufactured using Company-owned equipment located at the manufacturing facility. The Company determined that this arrangement results in an embedded lease which granted 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 was as follows (in thousands):


	June 30, 2023			December 31, 2022
Operating lease right-of-use assets(1)	$	5,329		$	6,714

Operating lease liability-current(2)	$	944		$	1,304
Operating lease liability-long-term		4,646			5,343
Total	$	5,590		$	6,647

Weighted average remaining lease term (in years)		4.1			4.6
Weighted average discount rate		7.3	%		7.3	%

_________________________

(1)

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

(2)

Operating lease liability – current are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease costs	$	410	$	341	$	831		629
Variable lease costs		13		73		49		159
Cash paid		234		446		557		887

The Company's future minimum office and vehicle lease payments ~~are~~were as ~~follows:~~follows (in thousands):


	June 30, 2023
2023	$	441
2024		1,496
2025		1,861
2026		1,140
2027		1,072
Thereafter		643
Total		6,653
Interest expense		(1,063	)
Total operating lease liability	$	5,590

2017

$
41,000

2018

457,000

2019

512,000

2020

528,000

2021

544,000

Thereafter

560,000

$
2,642,000

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

The Company has assessed its position with regards to uncertainty in tax positions and ~~believes that~~has not recognized a liability for unrecognized tax benefits. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax ~~filing positions and deductions will be sustained on audit and does not anticipate~~expense. During the six months ended June 30, 2023, the Company did not recognize any ~~adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income~~interest or penalties. The Company’s tax ~~positions have been recorded pursuant to this guidance. Tax~~ years since ~~2012~~2018 remain subject to examination by ~~the major~~ tax ~~jurisdictions in which the Company is subject to tax.~~authorities.

~~The Company adopted ASU 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ in the first quarter of 2017. The adoption had no net impact on its income tax expense for the quarter and net deferred tax assets as of the date of adoption (See Note 10 – Stock-Based Compensation Expense).32

As of September 30, 2017 and December 31, 2016, the Company had a remaining restructuring liability of $0.4 million and $1.4 million, respectively, which is recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets. The Company expects to substantially pay out the remainder of this obligation by end of first quarter of 2018.

~~A reconciliation of beginning and ending liability balances for the restructuring charges is as follows (in thousands):~~

~~The following tables summarize the components of the basic and diluted net income (loss) per common share computations (in thousands except par value and per share data):~~

As further discussed in Note 11 – Commitments and Contingencies, on September 29, 2017, the Company entered into exchange agreements with four holders of the 9.7 million outstanding warrants pursuant to which the Company agreed to issue to such holders and aggregate of 1,292,510 shares of the Company’s common stock on October 3, 2017. The Company has included the 1,292,510 shares of common stock in basic net income (loss) per common share because as of the balance sheet date, all conditions necessary to issue those shares had been satisfied.

~~Common shares issuable represents incremental shares of common stock which consist of~~ ~~stock options, restricted stock units, warrants, and shares that could be issued upon conversion of the senior convertible notes~~.

The computation of basic and diluted net loss per share for the three and nine months ended September 30, 2017 and 2016 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

~~For the three months ended September 30, 2016, the senior convertible notes were dilutive and therefore not included in the excluded potentially dilutive securities table above.~~

On October 10, 2017, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional investors and a charitable foundation (collectively, the “Purchasers”). Pursuant to the terms of the Purchase Agreements, the Company sold to the Purchasers in a registered offering an aggregate of 10,166,600 shares of the Company’s common stock at a purchase price of $6.00 per share. Included in this offering was 166,600 shares issued to a charitable foundation associated with a Director of the Company. The net proceeds to the Company from the offering were approximately $57.7 million, after deducting placement agent

fees equal to 5.0% of the aggregate gross proceeds from the offering (except for the proceeds received from the sale of 166,600 shares issued to the charitable foundation) and offering expenses payable by the Company. The offering closed on October 13, 2017.

~~Issuance of 2021 notes and common stock in exchange for 2018 senior convertible notes~~

On October 23, 2017, the Company entered into a privately negotiated exchange agreement with the holders of its 2018 notes, pursuant to which the Company agreed to exchange all of the outstanding 2018 notes in the aggregate principal amount of $27,690,000 for (i) $23,690,000 aggregate principal amount of 2021 notes and (ii) an aggregate of 973,236 shares of its common stock. The Company has classified the 2018 notes as long-term in its September 30, 2017 condensed consolidated balance sheet.

The 2021 notes are the Company’s general, unsecured, senior obligations, except that the 2021 notes are subordinated in right of payment to the 2019 notes and the Tranche B notes. The 2021 notes rank equally in right of payment with the Company’s other unsecured senior debt. The 2021 notes bear interest at the rate of 5.75% per year on the principal amount, payable semiannually in arrears in cash or, at the option of the Company if certain conditions are met, in shares of the Company’s common stock (the “Interest Shares”), on February 15 and August 15 of each year, beginning February 15, 2018, with interest accruing from August 15, 2017. The aggregate number of Interest Shares that the Company may issue may not exceed 13,648,300, unless the Company receives stockholder approval to issue Interest Shares in excess of such number in accordance with the listing standards of The NASDAQ Global Market. The 2021 notes will mature on October 23, 2021.

The 2021 notes are convertible, at the option of the holder, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 194.1748 shares per $1,000 principal amount of 2021 notes, which is equal to a conversion price of approximately $5.15 per share. The conversion rate is subject to adjustment under certain circumstances described in an indenture governing the 2021 notes.

If the Company undergoes certain fundamental changes, except in certain circumstances, each holder of 2021 notes will have the option to require the Company to repurchase all or any portion of that holder’s 2021 notes. The fundamental change repurchase price will be 100% of the principal amount of the 2021 notes to be repurchased plus accrued and unpaid interest, if any.

The Company may elect at its option to cause all or any portion of the 2021 notes to be mandatorily converted in whole or in part at any time prior to the close of business on the business day immediately preceding the maturity date, if the last reported sale price of its common stock equals or exceeds 120% of the conversion price then in effect for at least 10 trading days in any 20 trading day period, ending within five business days prior to the date of the mandatory conversion notice.

On October 23, 2017, the Company and MannKind LLC entered into a Fourth Amendment to the Facility Agreement, pursuant to which the parties (i) deferred the payment of $10.0 million in principal amount (the “October Payment”) of the 2019 notes from October 31, 2017 to January 15, 2018, with the Company depositing an amount of cash equal to the October Payment into an escrow account until the October Payment has been satisfied in full (subject to early release to the extent that portions of the October Payment are satisfied through the exchange of principal for shares of the Company’s common stock), and (ii) amended and restated the 2019 notes and the Tranche B notes to provide that Deerfield may convert the principal amount under such notes from time to time into an aggregate of up to 4,000,000 shares of the Company’s common stock after the effective date of the Fourth Amendment. The conversion price will be the greater of (i) the average of the volume weighted average price per share of the Company’s common stock for the three trading day period immediately preceding the date of any election by Deerfield to convert principal amounts of such notes and (ii) $3.25 per share, subject to adjustment under certain circumstances. Any conversions of principal by Deerfield under such notes will be applied first to reduce the October Payment, and after the October Payment has been satisfied, to reduce other principal payments due under the 2019 notes or the Tranche B notes.

On October 24, 2017, the Company entered into a transition and separation agreement (the “Agreement”) with Matthew J. Pfeffer, the Company’s former Chief Executive Officer and Chief Financial Officer, regarding the terms of Mr. Pfeffer’s transition and separation from the Company. Contemporaneously with his execution of the Agreement, Mr. Pfeffer submitted his resignation as a director of the Company, effective immediately.

Pursuant to the Agreement, which became irrevocable on November 1, 2017, Mr. Pfeffer provided the Company with a general release of claims and will remain employed with the Company to provide transition and other services through February 1, 2019, subject to his earlier resignation or termination by the Company. Mr. Pfeffer reports to the Company’s principal executive officer during the term of the Agreement, serving in a non-executive capacity.

During the term of the Agreement, and in lieu of any severance benefits Mr. Pfeffer may have been entitled to receive pursuant to the terms of his Executive Severance Agreement or Change of Control Agreement with the Company, Mr. Pfeffer will be entitled to

receive his current annual base salary of $490,350. Mr. Pfeffer will also be eligible to receive an annual bonus for 2017 pursuant to the standard bonus compensation structure applicable to the Company’s executive officers. In addition, if Mr. Pfeffer remains employed with the Company through February 1, 2019, remains in compliance with the Agreement and all Company policies, and provides the Company with an effective general release of claims within 21 days after that date, the Company will pay Mr. Pfeffer a severance payment in the amount of $345,000.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements in this report that are not strictly historical in nature are “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, though not all forward-looking statements contain these identifying words. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in Part II, Item 1A Risk Factors and elsewhere in this ~~quarterly report~~Quarterly Report on Form 10-Q. The preceding interim condensed consolidated financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and related notes for the year ended December 31, ~~2016~~2022 and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report. Readers are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

We are a biopharmaceutical company focused on the development and commercialization of ~~inhaled~~innovative therapeutic products and devices to address serious unmet medical needs for ~~patients~~those living with ~~diseases such as diabetes~~endocrine and ~~pulmonary arterial hypertension.~~orphan lung diseases. Our ~~only approved product,~~signature technologies—Technosphere dry-powder formulations and Dreamboat inhalation devices—offer rapid and convenient delivery of medicines to the deep lung where they can exert an effect locally or enter the systemic circulation. In our endocrine business unit, we currently commercialize two products: Afrezza ~~is a~~(insulin human) Inhalation Powder, an ultra rapid-acting inhaled insulin ~~that was approved by the~~ ~~FDA~~ ~~on June 27, 2014~~indicated to improve glycemic control in ~~adult patients~~adults with ~~diabetes. Afrezza became available by prescription in U.S. retail pharmacies in February 2015. According to~~diabetes, and the Centers for Disease Control and Prevention, 30.3 million people in the United States had diabetes in 2015. Globally, the International Diabetes Federation has estimated that approximately 415.0 million people had diabetes in 2015 and approximately 642.0 million people will have diabetes by 2040.

~~Afrezza is a rapid-acting inhaled~~V-Go wearable insulin ~~used to control high blood sugar~~delivery device, which provides continuous subcutaneous infusion of insulin in adults with type 1 and type 2 diabetes. The product consists of a dry powder formulation of human insulin delivered from a small portable inhaler. Administered at the beginning of a meal, Afrezza dissolves rapidly upon inhalation to the lung and delivers insulin quickly to the bloodstream.that require insulin. The first ~~measurable effects~~product to come out of ~~Afrezza occur approximately 12 minutes after administration.~~

~~From August 2014 until April 2016 Sanofi, was responsible~~our orphan lung disease pipeline, Tyvaso DPI (treprostinil) inhalation powder, received FDA approval in May 2022 for ~~commercial, regulatory~~the treatment of PAH and PH-ILD. Our development ~~activities associated with Afrezza. After~~and marketing partner, United Therapeutics, began commercializing Tyvaso DPI in June 2022 and is obligated to pay us a transition period during which Sanofi continued to fulfill orders for Afrezza, we began distributing MannKind-branded Afrezza to wholesalers in July 2016. During the second half of 2016, we utilized a contractroyalty on net sales organization to promote Afrezza while we focused our internal resources on establishing a channel strategy, entering into distribution agreements and developing co-pay assistance programs, a voucher program, data agreements and payor relationships. In early 2017, we recruited our own specialty sales force to promote Afrezza to endocrinologists and certain high-prescribing primary care physicians. In the future, we may seek to supplement our sales force through a co-promotion arrangement – an agreement with a third party that has an underutilized primary care sales force, which can be used to promote Afrezza to greater number of primary care physicians..

~~Our current strategy for future commercialization of Afrezza outside~~ of the United States, subject to receipt of the necessary foreign regulatory approvals, is to seek and establish regional partnerships in foreign jurisdictions where there are appropriate commercial opportunities.

product. We also ~~believe our Technosphere formulations~~receive a margin on supplies of active pharmaceutical ingredients have the potential to demonstrate clinical advantages over existing therapeutic options in a variety of therapeutic areas. In addition to our collaboration with Receptor Life Sciences,Tyvaso DPI that we are actively exploring other opportunities to out-license our proprietary Technosphere formulation and device technologies. We continue the development of certain products related to our Technosphere formulations and will continue to do so as permitted by our financial resources.manufacture for UT.

As of September 30, 2017, we had an accumulated deficit of $2.8 billion and a stockholders’ deficit of $251.0 million. We had a net loss of approximately $32.9 million and $84.5 million for the three and nine months ended September 30, 2017, respectively. We have historically funded our operations primarily through the sale of equity securities and convertible debt securities, borrowings under the Facility Agreement with Deerfield, borrowings under The Mann Group Loan Arrangement, which we can no longer borrow under as we have used all amounts available for borrowing, and the Sanofi License Agreement, which was terminated in 2016. As discussed below in “Liquidity and Capital Resources,” there is substantial doubt about our ability to continue as a going concern. As of September 30, 2017, we had cash and cash equivalents of $20.1 million, which does not include the approximately $57.7 million of net proceeds we received from the registered offering of our common stock completed in October 2017 after deducting placement

agent fees and other offering expenses payable by us. Our cash position, together with our short-term debt obligations and anticipated operating expenses, raises substantial doubt about our ability to continue as a going concern.

Our business is subject to significant risks, including but not limited to our ~~need to raise additional capital to fund our operations, our~~ ability to ~~successfully commercialize Afrezza and~~ manufacture sufficient quantities of ~~Afrezza~~our products and Tyvaso DPI. Other significant risks also include the risk that our products may only achieve a limited degree of commercial success and the risks inherent in ~~our ongoing~~drug development, clinical trials and the regulatory approval process for our product ~~candidates. Additional significant risks also include~~candidates, which in some cases depends upon the ~~results~~efforts of our ~~research~~partners.

As of June 30, 2023, we had an accumulated deficit of $3.2 billion and ~~development efforts, competition~~a stockholders’ deficit of $260.5 million. We had a net loss of $5.3 million and $15.1 million for the three and six months ended June 30, 2023, respectively. To date, we have funded our operations primarily through the sale of our equity and convertible debt securities, from ~~other products~~the receipt of upfront and ~~technologies~~milestone payments from collaborations, from borrowings, from sales of Afrezza and ~~uncertainties associated with obtaining~~V-Go, from royalties and ~~enforcing patent rights.~~manufacturing revenue from UT as well as from proceeds of the sale-leaseback of our manufacturing facility in Danbury, CT.

Our critical accounting policies and estimates can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~Form 10-K~~Annual Report. See Note 1 – Description of Business and Significant Accounting Policies in the condensed consolidated financial statements included in Part I – Financial Statements (Unaudited) for descriptions of the ~~year ended December 31, 2016~~new accounting policies and ~~there have been no material changes.~~impact of adoption.

Our collaborative agreement with UT entitles us to receive low double-digit royalties on net sales of Tyvaso DPI. Our royalty revenue continues to increase, which reflects the upward trend in demand for Tyvaso DPI in the marketplace.

We continue to maintain an elevated level of safety stock of certain raw materials due to concerns that supply chain interruptions may interfere with the manufacture of Afrezza, V-Go and Tyvaso DPI.

Manufacturing risks may adversely affect our ability to manufacture our products and could reduce our gross margin or impact our collaboration with UT.

Our future success is dependent on our, and our current and future collaboration partners’, ability to effectively commercialize approved products. Our future success is also dependent on our pipeline of new products. There is a high rate of failure inherent in the R&D process for new drugs. As a result, there is a high risk that the funds we invest in research programs will not generate sufficient financial returns. Products may appear promising in development but fail to reach market within the expected or optimal timeframe, or at all.

Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

The following table provides a comparison of the revenue categories for the three and six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (dollars in thousands):

Afrezza — Gross revenue from sales of Afrezza increased by $4.9 million, or 29%, for the three months ended ~~September~~June 30, ~~2017, total revenue decreased by $160.3 million~~2023 compared to the same period in the prior ~~year,~~year. The increase mainly reflects a combination of higher product demand and higher price. The gross-to-net adjustment was 39% of gross revenue, or $8.7 million, for the three months ended June 30, 2023, compared to 38% of gross revenue or $6.6 million, for the same period in the prior year. The increase in the gross-to-net percentage was primarily driven by ~~the collaboration revenue~~an increase in rebates (as a percentage of ~~$161.8 recognized in 2016 related to the agreement with Sanofi. The agreement with Sanofi was terminated in 2016. This decrease was offset by the increase in~~gross sales). As a result, net revenue from ~~Afrezza commercial product~~ sales of ~~$1.4 million.~~ Afrezza increased by $2.9 million, or 27%, for the three months ended June 30, 2023, compared to the same period in the prioryear.

Gross revenue from sales of Afrezza increased by $8.8 million, or 26%, for the six months ended June 30, 2023 compared to the same period in the prior year. The increase primarily reflects a combination of higher product demand and higher price. The gross-to-net adjustment was 38% of gross revenue, or $16.2 million, for the six months ended June 30, 2023, compared to 39% of gross revenue, or $12.9 million, for the same period in the prior year. As a result, net revenue from sales of Afrezza increased by $5.5 million, or 27%, for the six months ended June 30, 2023, compared to the same period in the prior year.

V-Go — Gross revenue from sales of V-Go increased by $6.9 million, or 169%, and net revenue by $2.7 million, or 132%, for the three months ended June 30, 2023, compared to the same period in the prior year. V-Go was acquired in May 2022. The gross-to-net adjustment was 56% of gross revenue, or $6.2 million, for the three months ended June 30, 2023, compared to 49% of gross revenue, or $2.0 million, for the same period in the prior year. The increase in gross-to-net percentage was mainly attributable to rebates.

Gross revenue from sales of V-Go increased by $17.4 million, or 425%, and net revenue by $7.9 million, or 380%, for the six months ended June 30, 2023, compared to the same period in the prior year. V-Go was acquired in May 2022. The gross-to-net adjustment was 54% of gross revenue, or $11.5 million, for the six months ended June 30, 2023, compared to 49% of gross revenue, or $2.0 million, for the same period in the prior year. The increase in gross-to-net percentage was mainly attributable to commercial and government rebates and product distribution fees.

Collaborations and Services —Net revenue from collaborations and services increased by $5.3 million, or 91%, for the three months ended June 30, 2023, and $14.6 million, or 181%, for the six months ended June 30, 2023, compared to the same periods in the prior year. The increases in collaborations and services revenue were primarily attributable to revenues associated with the CSA with UT. Revenue associated with the CSA was deferred until we began commercial manufacturing and subsequently selling Tyvaso DPI in June 2022. During the three months ended ~~September~~June 30, ~~2017,~~2023, we recognized ~~net~~$10.9 million of revenue ~~from Afrezza commercial product sales~~under the CSA and $19.1 million of ~~$2.0 million. Estimated gross-to-net adjustments~~royalty revenue, compared with $4.7 million of ~~$0.8~~revenue under the CSA and $0.3 million ~~were approximately 30%~~ of ~~gross~~royalty revenue ~~from product sales~~ for the ~~three~~same period in the prior year. During the six months ended ~~September~~June 30, ~~2017. We began distributing MannKind-branded Afrezza product to ICS Direct and wholesalers during the week of July 25, 2016. During the three months ended September 30, 2016,~~2023, we recognized ~~net~~$22.1 million of revenue ~~from Afrezza commercial product sales~~under the CSA and $30.7 million of ~~$0.6 million. Estimated gross-to-net adjustments~~royalty revenue, compared with $5.9 million of revenue under the CSA and $0.3 million ~~were approximately 32%~~ of ~~gross~~royalty revenue ~~from product sales~~ for the ~~three months ended September 30, 2016.~~same period in the prior year. See Note 10 – Collaboration, Licensing and Other Arrangements.

The following table provides a comparison of the ~~revenue~~commercial product gross profit categories for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (dollars in thousands):

~~During~~Commercial product gross profit increased by $5.0 million, or 62%, for the ~~nine~~three months ended ~~September~~June 30, ~~2017, total revenue decreased~~2023, and $9.5 million, or 61% for the six months ended June 30, 2023. The increase in gross profit was primarily attributable to an increase in Afrezza sales partially offset by ~~$155.1 million~~an increase in cost of goods sold due to higher commercial product sales and lower cost absorption as a result of the costs absorbed by the full commercial production of Tyvaso DPI beginning in the second quarter of 2022. The acquisition of V-Go in May 2022 contributed to the increase in commercial product sales and related cost of goods sold for the three and six months ended June 30, 2023. As a result, gross margin was 72% for the three months ended June 30, 2023, compared to 64% for the same period in the prior year ~~primarily driven by~~and 70% for the collaboration revenue of $161.8 million recognized in 2016 related to the agreement with Sanofi. The agreement with Sanofi was terminated in 2016. This decrease was offset by the increase in net revenue from Afrezza commercial product sales of $4.2 million.

~~During the nine~~six months ended ~~September~~June 30, ~~2017, we recognized net revenue from Afrezza commercial product sales of $4.7 million. Estimated gross-to-net adjustments of $2.4 million were approximately 33% of gross revenue from product sales~~2023, compared to 69% for the nine months ended September 30, 2017. We began distributing MannKind-branded Afrezza product to ICS Direct and wholesalers during the week of July 25, 2016. During the nine months ended September 30, 2016, we recognized net revenue from Afrezza commercial product sales of $0.6 million. Estimated gross-to-net adjustments of $0.3 million were approximately 32% of gross revenue from product sales for the nine months ended September 30, 2016.

~~Total expenses are primarily comprised of costs of goods sold, research and development expenses, selling expenses, and general and administrative expenses. Each is described in more detail below:~~

Costs of goods sold includes the costs related to Afrezza product dispensed by pharmacies to patients as well as excess capacity labor and overhead costs and inventory write-offs, which are recorded as expensessame period in the ~~period in which they are incurred, rather than as a portion of the inventory cost.~~prior year.

Our research and development expenses consist of costs associated with research and development of our product candidates, including associated clinical trials and manufacturing process development. This includes the salaries, benefits and stock-based compensation of research and development personnel, raw materials, laboratory supplies and materials, facility costs, costs for outsourced services and depreciation of equipment.

~~Our selling expenses are driven by salaries, benefits and stock-based compensation for sales and marketing personnel and for certain third party costs.~~

Our general and administrative expenses are driven by salaries, benefits and stock-based compensation for administrative, finance, human resources, legal and information systems support personnel and for certain third party costs.

The following table provides a comparison of the expense categories for the three and six months ended ~~September~~June 30, ~~2017 and 2016~~2023 (dollars in thousands):

~~During~~Cost of revenue – collaborations and services increased by $0.7 million, or 9%, for the three months ended ~~September~~June 30, ~~2017, we did not recognize any~~2023, and $2.7 million, or 16%, for the six months ended June 30, 2023, compared to the same periods in the prior year. The increases were attributable to an increase in manufacturing activities for the sale of Tyvaso DPI product ~~costs - collaboration. During~~to UT which began in the second quarter of 2022.

R&D expenses increased by $1.6 million, or 32%, for the three months ended ~~September~~June 30, ~~2016, we~~2023, and $3.6 million, or 43%, for the six months ended June 30, 2023, compared to the same periods in the prior year. The increases were primarily attributable to development activities for MNKD-101 (inhaled clofazimine) and the Afrezza post-marketing clinical study (INHALE-3) which commenced in the second quarter of 2023.

Selling expenses decreased by $1.9 million, or 12%, for the three months ended June 30, 2023, and $1.3 million, or 4%, for the six months ended June 30, 2023, compared to the same periods in the prior year. The decreases were primarily attributable to the termination of an Afrezza pilot promotional effort targeting primary care physicians, which ended in the third quarter of 2022, partially offset by increased headcount after the acquisition of V-Go in the second quarter of 2022.

General and administrative expenses increased by $1.8 million, or 17%, for the three months ended June 30, 2023, and $4.3 million, or 24%, for the six months ended June 30, 2023, compared to the same periods in the prior year. The increases were primarily attributable to higher stock-based compensation and increased headcount.

Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros. We are required to record the non-cash foreign currency transaction impact of the U.S. dollar to Euro exchange rate associated with the recognized ~~$22.7 million of product costs – collaboration, which consists of $13.5 million in Afrezza manufacturing costs for product sold to Sanofi and $9.2 million for a change in estimate in our recognized~~gain or loss on purchase ~~commitments related to the sale of raw insulin to Sanofi.~~commitments. The ~~Afrezza manufacturing costs were previously deferred on the condensed consolidated balance sheet at December 31, 2015.~~

~~The increase in cost of goods sold of $0.2~~foreign currency transaction loss was $0.3 million for the three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~the same period in the prior year is due to~~ a ~~write-down~~gain of inventory of $0.4 million for expiring and obsolete inventory and by $0.3 million of costs of goods sold attributable to the manufacturing of Afrezza dispensed to patients. This increase was offset by a decrease in excess-capacity labor and overhead costs of $0.5 million due to the reduction in work force in the fourth quarter of 2016.

The increase in research and development expense of $0.4 million for the three months ended September 30, 2017 compared to the same period in the prior year is primarily due to increases in expenses related to clinical trials of $1.5 million. Partially offsetting the increases was a decrease in salaries and benefits of $0.8 million and non-cash stock-based compensation expense of $0.2 million.

The increase in selling expenses of $2.2 million for the three months ended September 30, 2017 compared to the same period in the prior year is primarily due to increases of $3.5 million for compensation expense due to the increase in the sales force that we brought in-house during the first quarter of 2017, $0.9 million for travel and related sales force expenses, $0.2 million of other expenses and $0.1 million for costs of external services. Partially offsetting the increase was a decrease in contracted labor expenses of $2.6 million as a result of the transition of all of the sales force in-house.

The increase in general and administrative expenses of $2.4 million for the three months ended September 30, 2017 compared to the same period in the prior year was primarily due to increased salaries and benefits of $2.0 million, increased relocation expenses of $0.2 million, and increased other expenses of approximately $0.2 million.

~~Loss on foreign currency translation of $3.7 million for the three months ended September 30, 2017 compared to the loss on foreign currency translation of $1.0~~$4.5 million for the same period in the prior year, ~~was due to the currency translation~~and a loss of ~~the U.S. dollar to euro exchange rate associated with the purchase commitments of Insulin from Amphastar.~~

~~The following table provides a comparison of the expense categories for the nine months ended September 30, 2017 and 2016 (dollars in thousands):~~

During the nine months ended September 30, 2017, we did not recognize any product costs - collaboration. During the nine months ended September 30, 2016, we recognized $22.7 million of product costs – collaboration, which consists of $13.5 million in costs of manufacturing Afrezza for product sold to Sanofi and $9.2 million for a change in estimate in our recognized loss on purchase commitments related to the sale of raw insulin to Sanofi. The Afrezza manufacturing costs were previously deferred on the consolidated balance sheet at December 31, 2015.

~~The decrease in cost of goods sold of $0.7~~$1.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, compared to ~~the same period in the prior year is due to~~ a ~~$3.8 million decrease in excess-capacity labor and overhead costs resulting from the reduction in work force in the fourth quarter~~gain of 2016 and no manufacturing of Afrezza in the first quarter of 2016. This decrease was partially offset by $1.8 million of inventory write downs in expiring and obsolete inventory and $1.0 million of cost of goods sold attributed to Afrezza sales.

The decrease in research and development expense of $2.7 million for the nine months ended September 30, 2017 compared to the same period in the prior year is primarily due to decreases in compensation expense of $4.5 million and non-cash stock-based compensation expense of $0.6 million. Partially offsetting the decrease is an increase in costs related to clinical trials of $2.0 million and pharmacovigilance costs of $0.3 million.

The increase in selling expenses of $17.5 million for the nine months ended September 30, 2017 compared to the same period in the prior year is primarily due to increases of $12.0 million for compensation expense due to the increase in the sales force that we brought in-house during the first quarter of 2017, $2.9 million for cost of external services and commercial support, $2.8 million for

travel and related sales force expenses, $2.5 million of samples, market research and promotions, and $0.8 million for other expenses. Partially offsetting the increase was a decrease in contracted labor expenses of $3.5 million as a result of the transition of all of the sales force in-house.

The increase in general and administrative expenses of $2.6 million for the nine months ended September 30, 2017 compared to the same period in the prior year was primarily due to increased compensation expense of $2.5 million, $0.3 million in other employee related expenses, $0.8 million in contracted labor expenses, $0.7 million in purchased services, $0.2 million increased expenses for information systems supporting salesforce personnel and $0.2 million in other expenses. These increases were offset by a decrease of $2.2 million in legal expenses as a result of the Sanofi settlement that was reached in 2016.

~~Loss on foreign currency translation of $12.1 million for the nine months ended September 30, 2017 compared to $3.0~~$6.5 million for the same period in the prior ~~year was due to the currency translation impacting the U.S. dollar to euro exchange rate associated with the recognized loss on purchase commitments of Insulin from Amphastar.~~year.

The following table provides a comparison of the other income (expense) categories for the three and six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (dollars in thousands):

Interest income, consisting of interest on investments net of amortization, increased by $1.0 million for the three months ended ~~September~~June 30, ~~2017, we recorded~~2023, and by $2.0 million for the six months ended June 30, 2023, compared to the same periods in the prior year primarily due to higher yields on our marketable securities and money market funds.

Interest expense on financing liability was $2.4 million for the three months ended June 30, 2023, and $4.9 million for the six months ended June 30, 2023, and remained consistent with the same periods in the prior year. See Note 15 – Commitments and Contingencies.

Interest expense was $6.9 million for the three months ended June 30, 2023, and $9.7 million for the six months ended June 30, 2023, and remained consistent with the same periods in the prior year due to fixed interest rates on notes and consistent recognition of interest expense related to the achievement of Afrezza milestones. See Note 8 – Accrued Expenses and Other Current Liabilities and Note 9 – Borrowings.

Gain on available-for-sale securities for the three and six months ended June 30, 2023 was $0.9 million as a ~~$1.3 million increase~~result of the change in the fair value of the ~~warrant liability compared~~investment that related to ~~$13.2 million decrease~~credit risk.

Other expense for the ~~same period in the prior year due~~three and six months ended June 30, 2023 and 2022 consisted primarily of losses associated with a foreign currency hedging transaction that was entered into to mitigate our exposure to the ~~volatility in~~foreign currency exchange risk associated with our ~~stock price. On September 29, 2017, we~~Insulin Supply Agreement.

Our principal sources of liquidity are our cash, cash equivalents, and investments. Our primary uses of cash include the four holders of all outstanding A Warrants and B Warrants entered into separate, privately-negotiated exchange agreements, pursuant to which we agreed to issue to such holders an aggregate of 1,292,510 sharesdevelopment of our ~~common stock in exchange for such warrants. The warrant liability associated with~~product pipeline, the ~~exchanged warrants was adjusted to fair value~~manufacturing and ~~reclassified into equity as~~marketing of ~~September 29, 2017.~~

~~The decrease~~Afrezza and V-Go, manufacturing Tyvaso DPI, the funding of ~~$1.9 million in the~~general and administrative expenses, and interest expense on ~~notes for the three months ended September 30, 2017 compared to the same period in the prior year was primarily related to the Sanofi debt that was forgiven in the fourth quarter of 2016.~~our financing liability and debt.

The increase of $0.4 million in the interest expense on note payable to principal stockholder for the three months ended September 30, 2017 compared to the same period in the prior year was primarily related to the increase in the principal balance of the note due to additional borrowings and capitalization of interest in the second quarter of 2017.37

~~The following table provides a comparison of the other income (expense) categories for the nine months ended September 30, 2017 and 2016 (dollars in thousands):~~

During the nine months ended September 30, 2017, we recorded a $5.5 million decrease in the fair value of the warrant liability compared to $7.9 million for the same period in the prior year due to the volatility in our stock price. On September 29, 2017, we and the four holders of all outstanding A Warrants and B Warrants entered into separate, privately-negotiated exchange agreements,

pursuant to which we agreed to issue to such holders an aggregate of 1,292,510 shares of our common stock in exchange for such warrants. The warrant liability associated with the exchanged warrants was adjusted to fair value and reclassified into equity as of September 29, 2017.

The decrease of $5.1 million in the interest expense on notes for the nine months ended September 30, 2017 compared to the same period in the prior year was primarily related to the Sanofi debt that was forgiven in the fourth quarter of 2016.

The increase of $0.4 million in the interest expense on note payable to principal stockholder for the nine months ended September 30, 2017 compared to the same period in the prior year was primarily related to the increase in the principal balance of the note due to additional borrowings and capitalization of interest in the second quarter of 2017.

The increase in the loss on extinguishment of debt of $0.8 million compared to the same period in the prior year was primarily related to the Deerfield exchange transactions entered into in April and June 2017.

To date, we have funded our operations primarily through the sale of equity ~~securities~~ and convertible debt securities, ~~borrowings under The Mann Group Loan Arrangement, which we can no longer borrow under as we have used all amounts available for borrowing, borrowings under~~from the ~~Facility Agreement with Deerfield,~~ receipt of upfront and milestone payments ~~under~~from collaborations, from borrowings, from sales of Afrezza and V-Go, from royalties and manufacturing revenue from UT as well as from proceeds from the ~~Sanofi License Agreement,~~sale-leaseback transaction.

We believe we will be able to meet our liquidity needs over the next twelve months, as well as longer-term needs, based on the balance of cash, cash equivalents and ~~borrowings under~~investments on hand, projected sales of Afrezza and V-Go, and projected royalties and manufacturing revenue from the ~~Sanofi Loan Facility which terminated in 2016.~~production and sale of Tyvaso DPI.

As of ~~September~~June 30, ~~2017,~~2023, we had ~~$167.4~~$69.2 million in insulin purchase commitments and $278.8 million principal amount of outstanding debt, consisting of:

~~On June 27, 2017, we entered~~in December 2025, which is convertible into an agreement with The Mann Group, pursuant to which the parties agreed to, among other things, (i) capitalize $10.7 million of accrued and unpaid interest as of June 30, 2017 under The Mann Group Loan Arrangement, resulting in such amount being classified as outstanding principal under The Mann Group Loan Arrangement, (ii) advance to us approximately $19.4 million, the remaining amount available for borrowing by us under The Mann Group Loan Arrangement after the foregoing capitalization of accrued and unpaid interest, and (iii) defer all interest payable on the outstanding principal under The Mann Group Loan Arrangement until July 1, 2018, unless such payments are otherwise permitted under the subordination agreement with Deerfield, and subject to further deferral under the subordination agreement with Deerfield until our payment obligations to Deerfield have been satisfied in full. There are no additional funds available to borrow under The Mann Group Loan Arrangement. As of September 30, 2017, there was $1.2 million accrued and unpaid interest under The Mann Group Loan Arrangement.

On April 18, 2017, we entered into an Exchange Agreement with Deerfield resulting in the cash repayment of $4.0 million under the Tranche B notes and the conversion of $1.0 million and $5.0 million of the Tranche B notes and the 2019 notes, respectively, to common shares. On June 29, 2017, we entered into ~~the Third Amendment~~ resulting in the conversion of $5.0 million of the 2019 notes to common shares and deferment of $10.0 million of principal amount of the 2019 notes due July 18, 2017 to October 31, 2017 under the 2019 notes. On October 23, 2017, we entered into a Fourth Amendment to the Facility Agreement with Deerfield, pursuant to which the parties (i) further deferred the payment of such $10.0 million in principal amount (the “October Payment”) of the 2019 notes from October 31, 2017 to January 15, 2018, with us depositing an amount of cash equal to the October Payment into an escrow account until the October Payment has been satisfied in full (subject to early release to the extent that portions of the October Payment are satisfied through the exchange of principal for shares of our common stock), and (ii) amended and restated the 2019 notes and the Tranche B notes to provide that Deerfield may convert the principal amount under such notes from time to time into an aggregate of up to 4,000,000 shares of our common stock ~~after~~at the ~~effective date~~option of ~~the Fourth Amendment. The~~Mann Group at a conversion price ~~will be the greater~~ of ~~(i) the average of the volume weighted average price~~$2.50 per ~~share of our common stock for the three trading day period immediately preceding the date of any election by Deerfield to convert principal amounts of such notes and (ii) $3.25 per share,~~

subject to adjustment under certain circumstances. Any conversions of principal by Deerfield under such notes will be applied first to reduce the October Payment, and after the October Payment has been satisfied, to reduce other principal payments due under the 2019 notes or the Tranche B notes.

~~Outstanding debt~~share. Interest is more fully described in Note 5 – Related Party Arrangements, Note 6- Borrowings, Note 9 – Fair Value of Financial Instruments, Note 11 – Commitments and Contingencies and Note 15 – Subsequent Events.

There can be no assurance that we will have sufficient resources to make any required repayments of principal under the 2021 notes, 2019 notes, Tranche B notes or The Mann Group Loan Arrangement when required. Further, if we undergo a fundamental change, as that term is defined in the indentures governing the terms of the 2021 notes, or certain Major Transactions as defined in the Facility Agreement in respect of the 2019 notes and the Tranche B notes, the holders of the respective debt securities will have the option to require us to repurchase all or any portion of such debt securities at a repurchase price of 100% of the principal amount of such debt securities to be repurchased plus accrued and unpaid interest, if any. The 2021 notes bear interest at the rate of 5.75% per year on the outstanding principal amount, payable in cash semiannually in arrears on February 15 and August 15 of each year. The 2019 notes bear interest at the rate of 9.75% per year on the outstanding principal amount and the Tranche B notes bear interest at the rate of 8.75% on the outstanding principal amount, with accrued interest on each payable in cash quarterly in arrears on the last business day of March, June, September and December of each year. Outstanding loans under The Mann Group Loan Arrangement accrue interest at a rate of 5.84% per annum, due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter, except that The Mann Group has agreed to defer interest payments until July 1, 2018 unless otherwise permitted by the subordination agreement with Deerfield, and such interest payments are subject to additional deferral beyond July 1, 2018 untilin-kind or in shares at our ~~payment obligations to Deerfield have been satisfied in full. While~~option.

To date, we have been able to timely make our required interest payments, ~~to date,~~but we cannot guarantee that we will be able to do so in the future. If we fail to ~~pay interest on the 2021~~repay, repurchase or redeem our outstanding notes ~~2019 notes, and Tranche B notes or if we fail to repay or repurchase the 2021 notes, 2019 notes, Tranche B notes, or borrowings under The Mann Group Loan Arrangement,~~when required, we will be in default under the applicable instrument for such indebtedness and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time. Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the ~~note holders~~noteholders initiating bankruptcy proceedings or causing us to cease operations altogether.

In ~~connection with the execution of the Facility Agreement, on~~ July 1, 2013, we issued certain milestone rights ("Milestone Rights") pursuant to the Milestone Rights Agreement to the Original Milestone Purchasers. The Milestone Rights were subsequently assigned the Milestone Purchasers. The Milestone Rights provide the Milestone Purchasers certain rights to receive payments of up to $90.0 million upon the occurrence of specified strategic and sales milestones, ~~including the first commercial sale~~$60.0 million of ~~an Afrezza product and the~~which remain payable upon achievement of specified net sales figures. In addition, the Facility Agreement includes customary representations, warranties and covenants, including, a restriction on the incurrence of additional indebtedness, and a financial covenant which requires our cash and cash equivalents on the last day of each fiscal quarter to not be less than $25.0 million, or pursuant to the Third Amendment, $10.0 millionsuch milestones as of ~~the last day of each month through October 31, 2017 and as of December 31, 2017 if certain conditions are met.~~June 30, 2023. See Note ~~11 —~~ 8 – Accrued Expenses and Other Current Liabilities, Note 9 – Borrowings and Note 15 – Commitments and Contingencies ~~and Note 6 — Borrowings~~ for further information related to the ~~Facility Agreement.~~Milestone Rights.

~~On July 31, 2014,~~During the six months ended June 30, 2023, we ~~entered into the Insulin Supply Agreement, pursuant to which we agreed to purchase certain annual minimum quantities~~generated $3.8 million of ~~insulin. See Note 11 — Commitments and Contingencies for further information related to the Insulin Supply Agreement.~~

Pursuant to the Sanofi License Agreement, we received an initial upfront payment of $150.0 million and milestone payments totaling $50.0 million in the first quarter of 2015 upon satisfaction of certain manufacturing milestones specified in the Sanofi License Agreement. As a result of the termination of the Sanofi License Agreement, we will not receive any additional milestone paymentscash from Sanofi under the agreement. In addition, on November 9, 2016, in connection with the Settlement Agreement, we and Aventisub LLC, an affiliate of Sanofi, agreed to terminate the Sanofi Loan Facility. In connection with such termination, Aventisub LLC agreed to forgive the full outstanding loan balance on the Sanofi Loan Facility of $72.0 million owed by us and agreed to release its security interests encumbering our assets. Sanofi also agreed to make a cash payment of $30.6 million to us, which was received in early January 2017 as acceleration and in replacement of all other payments that Sanofi would otherwise have been required to make in the future pursuant to the insulin put option, without being required to deliver any insulin for such payment. See Note 7 — Collaboration Arrangements for further information related to the Sanofi agreements.

~~Cash used in~~ operating activities, which ~~consists~~consisted primarily of ~~net loss adjusted~~$98.6 million of revenue, partially offset by $39.5 million of cost of goods sold, $25.0 million of selling expenses, $14.2 million of general and administrative expenses, $13.1 million of R&D costs and $4.3 million of cash paid for interest.

During the ~~various non-cash items, changes in working capital and changes in other balance sheet accounts, totaled $34.8 million for the nine~~six months ended ~~September~~June 30, ~~2017. Cash used in operating activities totaled $65.3 million for the nine months ended September 30, 2016.~~

~~During the nine months ended September 30, 2017,~~2022, we used ~~$34.8~~$50.2 million of cash for our operating activities, ~~as a result~~which primarily consisted of our net loss of $84.5 million, offset by a net increase in operating assets and liabilities of $33.2 million and non-cash charges of $16.5 million. The increase in operating assets and liabilities was primarily as a result of the receipt of $30.6 million from Sanofi pursuant to the insulin put option in January 2017, increases in accounts payable of $2.0 million and accrued expenses and other current liabilities of $2.9

million, offset by decreases in deferred revenue of $0.4 million, and purchase commitment liabilities of $0.6 million and increases accounts receivable of $1.5 million, inventory of $0.8 million, and deferred costs from commercial product sales of $0.2 million. The non-cash charges included $5.5 million from changes in the fair value of the warrant liability, offset by $12.0 million loss on foreign currency exchange, $3.7$38.6 million of ~~stock-based compensation, $2.7~~selling and general and administrative expenses, $21.5 million of ~~depreciation, amortization and accretion, $2.6~~cost of goods sold, $10.9 million of ~~interest accrued through notes payable to principal stockholder~~costs for R&D and ~~$0.8 million of loss on extinguishment of debt.~~

~~During the nine months ended September 30, 2016, we used $65.3~~$5.8 million of cash paid for ~~our operating activities as a result of a net decrease in operating assets and liabilities of $146.0 million~~interest, partially offset by ~~our net income of $71.7 million, adjusted by non-cash charges of $8.9 million. The non-cash charges included $3.1~~$31.7 million of depreciation and accretion, $4.1 million of stock-based compensation, $2.2 million of interest accrued on borrowings from our principal stockholder, a $3.0 million loss on foreign currency translation exchange, $4.1 million of interest accrued on borrowings under Sanofi Loan Facility and other non-cash charges of $0.7 million offsetrevenue.

Cash provided by a $7.9 million non-cash gain from a change in the fair value of warrants and $1.0 million gain on purchase commitments. Also within adjustments to reconcile net income to net cash used was $0.7 million from A Warrant issuance costs included in financing. The changes in operating assets and liabilities were due to increases in accounts receivable of $3.1 million, inventory of $5.1 million, deferred costs from commercial product sales of $0.3 million, prepaid expenses and other current assets of $0.5 million, accrued expenses and other current liabilities of $6.6 million, deferred revenue of $2.0 million and purchase commitment liabilities of $3.4 million, offset by decreases in deferred costs from collaboration of $13.5 million, accounts payable of $10.3 million, deferred sales from collaborationinvesting activities of $17.5 million for the six months ended June 30, 2023 was primarily due to $69.1 million of proceeds received from the sales of debt securities, partially offset by the purchase of debt securities of $26.4 million and ~~deferred payment from collaboration of $135.0 million.~~

~~Cash provided from investing activities was $16.7~~by $25.2 million for the ~~nine months ended September 30, 2017 compared to cash~~purchase of property and equipment.

Cash used in investing activities of ~~$1.1~~$37.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The difference~~2022 was primarily due to the purchase of $68.5 million of debt securities, the up-front consideration of $15.1 million for certain assets and assumed liabilities related to ~~net proceeds received during~~V-Go, $5.0 million purchase of available-for-sale securities, and $2.2 million purchase of property and equipment, partially offset by the ~~nine months ended September 30, 2017 for the sale~~maturity of ~~certain parcels~~$53.3 million of ~~real estate owned by us~~debt securities.

Cash used in ~~Valencia, California and certain related improvements, personal property, equipment, supplies and fixtures for $16.7 million.~~

~~Cash provided from~~ financing activities ~~was $15.3~~of $4.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 was primarily ~~related~~due to ~~$19.4~~$8.5 million ~~received~~of payments to taxing authorities from ~~borrowings on the note payable to principal stockholder~~equity withheld upon vesting of RSUs and stock options, partially offset by ~~a principal payment of $4.0~~$3.7 million ~~on the facility financing obligation.~~ in proceeds from at-the-market offerings.

Cash ~~provided by~~used in financing activities of ~~$42.9~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 was primarily ~~related~~due to ~~$47.4 in net proceeds received~~the payments on our financing liability of $1.4 million.

We believe we will be able to meet our near-term liquidity needs based on our cash, cash equivalents and investments on hand, sales of Afrezza and V-Go, and royalties and manufacturing revenue from the production and sale of ~~stock~~Tyvaso DPI as well as through debt or equity financing, if necessary, for our long-term liquidity needs. We are not currently profitable and ~~warrants during~~have rarely generated positive net cash flow from operations. In addition, we expect to continue to incur expenditures for the ~~nine months ended September 30, 2016.~~

foreseeable future in support of our manufacturing operations, sales and marketing costs for our products and development costs for other product candidates in our pipeline. As of ~~September~~June 30, ~~2017,~~2023, we had ~~$20.1~~capital resources comprised of $86.2 million in cash and cash equivalents, ~~which, does not include~~$58.2 million in short-term investments and $2.3 million in long-term investments, and total principal amount of outstanding borrowings of $278.8 million.

We believe our resources will be sufficient to fund our operations for the ~~approximately $57.7 million of net proceeds we received~~next twelve months from the ~~registered offering~~date of issuance of our ~~common stock completed~~condensed consolidated financial statements included in October 2017 after deducting placement agent fees and other offering expenses payable by us. Our cash position, together with our short-term debt obligations and anticipated operating expenses, raises substantial doubt about our ability to continue as a going concern. We expect to expend our capital resources for the manufacturing, sales and marketing of Afrezza and to develop our product candidates. We also intend to use our capital resources for general corporate purposes.Part I – Financial Statements (Unaudited).

If we enter into strategic business collaborations with respect to our product candidates or Afrezza for commercialization outside of the United States, we may, as part of the transaction, receive additional capital. In addition, we expect to pursue the sale of equity and/or debt securities, or the establishment of other funding facilities. Issuances of debt or additional equity could impact the rights of our existing stockholders, dilute the ownership percentages of our existing stockholders and may impose restrictions on our operations. These restrictions could include limitations on additional borrowing, specific restrictions on the use of our assets as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. We also may seek to raise additional capital by pursuing opportunities for the licensing, sale or divestiture of certain intellectual property and other assets, including our Technosphere technology platform. There can be no assurance, however, that any strategic collaboration, sale of securities or sale or license of assets will be available to us on a timely basis or on acceptable terms, if at all. If we are unable to raise additional capital when needed or on acceptable terms, we may be required to enter into agreements with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such agreements may not be on terms as commercially favorable to us.

We cannot provide assurances that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. If planned operating results are not achieved or we are not successful in raising additional capital through equity or debt financing or entering business collaborations, we will be required to reduce expenses through the delay, reduction or curtailment of our projects, or further reduction of costs for facilities and administration, and there will continue to be substantial doubt about our ability to continue as a going concern.

~~As of September 30, 2017, we did not have any off-balance sheet arrangements.~~

AsSee Note 9 – Borrowings and Note 15 – Commitments and Contingencies for a discussion of ~~September 30, 2017, there were no~~ material changes outside of the ordinary course of business in our contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in the Annual ~~Report, except for the following:~~Report.

On June 27, 2017, we entered into an agreement with The Mann Group, pursuant to which the parties agreed to, among other things, (i) capitalize $10.7 million of accrued and unpaid interest as of September 30, 2017 under The Mann Group Loan Arrangement, resulting in such amount being classified as outstanding principal under The Mann Group Loan Arrangement, (ii) advance to us approximately $19.4 million, the remaining amount available for borrowing by us under The Mann Group Loan Arrangement after the foregoing capitalization of accrued and unpaid interest, and (iii) defer all interest payable on the outstanding principal under The Mann Group Loan Arrangement until July 1, 2018, unless such payments are otherwise permitted under the subordination agreement with Deerfield, and subject to further deferral under the subordination agreement with Deerfield until our payment obligations to Deerfield have been satisfied in full. The outstanding principal amount, including the additional amounts borrowed under the June 2017 agreement, and all accrued interest thereon will continue to be due on January 5, 2020.

On April 18, 2017, we entered into an Exchange Agreement with Deerfield pursuant to which we agreed to, among other things, (i) repay $4.0 million principal amount under the Tranche B notes; (ii) exchange $1.0 million principal amount under the Tranche B notes for 869,565 shares of our common stock; and (iii) exchange $5.0 million principal amount under the 2019 notes for 4,347,826 shares of our common stock. The exchange price for the Exchange Shares was $1.15 per share. We determined that the principal amount being repaid and exchanged under the Tranche B notes and the principal amount being exchanged under the 2019 notes represents the principal amount that would have otherwise become due and payable in May 2017 and July 2017 under the Tranche B notes and the 2019 notes, respectively. On June 29, 2017, we entered into ~~the Third Amendment~~ resulting in the conversion of $5.0 million of the 2019 notes to common shares and deferment of $10.0 million of principal amount of the 2019 notes due July 18, 2017 to August 31, 2017. This $10.0 million principal payment was subsequently deferred to January 15, 2018 under the Fourth Amendment with Deerfield, which we entered into on October 23, 2017.

On May 5, 2017, we executed an office lease with Russell Ranch Road II LLC to lease office space for our corporate headquarters in Westlake Village, California. The office lease commenced in August 2017. The lease requires monthly payments of $40,951, increased by 3% annually, plus the estimated cost of maintaining the property by the landlord with a five month concession from September 2017 through January 2018. The lease expires December 2022 and provides us with a five year renewal option.

Our contractual obligations are more fully described in Note 5 – Related Party Arrangements, Note 6- Borrowings, Note 9 – Fair Value of Financial Instruments and Note 11 – Commitments and Contingencies.

ITEM 3. QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Due~~Interest on borrowings under the MidCap credit facility accrues 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%. Accordingly, our interest expense under the MidCap credit facility is subject to changes in the one-month SOFR rate.

All other debt has fixed interest rates, ~~of our~~so the interest expense associated with such debt ~~we currently do~~is not ~~have exposure~~exposed to changes in ~~our interest expense as a result of changes in~~market interest rates. ~~The~~Specifically, the interest rate on ~~amounts~~the amount borrowed under ~~The~~the Mann Group ~~Loan Arrangement~~convertible note is fixed at 2.50% and the interest rate under the Senior convertible notes is fixed at 2.50%. See Note 9 – Borrowings for information about the ~~three and nine months ended September 30, 2017 was a fixed rate equal to 5.84%. As of September 30, 2017, the total~~ principal amount of outstanding under The Mann Group Loan Arrangement was $79.7 million. We also have debt related to the 2021 notes at a fixed interest rate of 5.75%, debt related to the 2019 notes at a fixed interest rate of 9.75% and debt related to the Tranche B notes at a fixed interest rate of 8.75%.debt.

Our current policy requires us to maintain a highly liquid short-term investment portfolio consisting mainly of U.S. money market funds and investment-grade corporate, government and municipal debt. None of these investments are entered into for trading purposes. Our cash is deposited in and invested through highly rated financial institutions in North America.

If a hypothetical 10% change in ~~interest rates equal to 10% of~~ the one-month SOFR interest rates on ~~September~~June 30, ~~2017~~2023 were to have occurred, this change would not have had a material effect on ~~the value of~~ our ~~short-term investment portfolio.~~interest payment obligation.

In April 2023, we entered into a 90-day foreign currency hedging transaction to mitigate our exposure to foreign currency exchange risks associated with our insulin purchase obligation under the Insulin Supply Agreement. The hedging transaction hedges against short-term currency fluctuations for the remaining current year purchase obligation under the Insulin Supply Agreement of €3.3 million, for which we realized a de minimis amount of loss during the three months ended June 30, 2023. This amount is recorded in other income and expense.

We incur and will continue to incur significant expenditures for insulin supply obligations under our ~~supply agreement~~Insulin Supply Agreement with Amphastar. Such obligations are denominated in ~~euros.~~Euros. At the end of each reporting period, ~~these liabilities, if any, are~~the recognized gain or loss on purchase commitment is converted to U.S. dollars at the then-applicable foreign exchange rate. As a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and ~~foreign currencies. We have not entered into~~the Euro. For the six months ended June 30, 2023, we realized a $1.2 million currency loss, which was included in loss on foreign currency ~~hedging transactions to mitigate our exposure to foreign currency exchange risks, but may enter into foreign currency hedging transactions~~transaction in the ~~future.~~ accompanying condensed consolidated statements of operations.

Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows. If a change in the U.S. dollar to ~~euro~~Euro exchange rate equal to 10% of the U.S. dollar to ~~euro~~Euro exchange rate on June 30, 2023 were to have occurred, ~~on September 30, 2017,~~ this change would have resulted in a foreign currency impact to our pre-tax ~~losses~~loss of approximately ~~$11.0~~$6.9 million.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~or the Exchange Act,~~(the “Exchange Act”), as of ~~September~~June 30, ~~2017.~~2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of ~~September~~June 30, ~~2017, we~~2023, our Chief Executive Officer and our Chief Financial Officer have concluded, as of such date, that our disclosure controls and procedures were effective.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~We are also~~ subject to legal proceedings and claims ~~which~~that arise in the ordinary course of our business. As of the date hereof, we believe that the final disposition of such matters will not have a material adverse effect on our financial position, results of operations or cash flows. We maintain liability insurance coverage to protect our assets from losses arising out of or involving activities associated with ongoing and normal business operations.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission before making investment decisions regarding our common stock.

We face risks and uncertainties related to our business, many of which are beyond our control.In particular, risks associated with our business include:

You should consider carefully the following information about the risks described below, together with the other information contained in this ~~quarterly report~~Quarterly Report on Form 10-Q before you decide to buy or maintain an investment in our common stock. We believe the risks described below are the risks that are material to us as of the date of this ~~quarterly report.~~Quarterly Report. Additional risks and uncertainties that we are unaware of may also become important factors that affect us. The risk factors set forth below marked with an asterisk (*) did not appear as separate risk factors in, or ~~contain~~contains changes to the similarly titled risk factors included in, Item 1A of the Annual Report. If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock.

The products that we or our collaboration partner are commercializing may only achieve a limited degree of commercial success.*

Successful commercialization of therapeutic products is subject to many risks, including some that are outside our control. There are numerous examples of failures to fully exploit the market potential of therapeutic products, including by biopharmaceutical and device companies with more experience and resources than us. The products, including products that we commercialize ourselves and any products that we may develop or acquire in the future, and the product that is commercialized by our collaboration partner and future products that may be commercialized by a collaboration partner, may not gain market acceptance among physicians, patients,

third-party payers and the healthcare community. The degree of market acceptance of our or a collaboration partner’s products depends on many factors, including the following:

Because of these and other factors, the products described above may not gain market acceptance or otherwise be commercially successful. Failure to achieve market acceptance would limit our ability to generate revenue and would adversely affect our results of operations. We or our current or any future collaboration partner may need to enhance our/their commercialization capabilities in order to successfully commercialize such products in the United States or any other jurisdiction in which the product is approved for commercial sale, and we or the collaboration partner may not have sufficient resources to do so.

In order to increase adoption and sales of our products, we need to continue to develop our commercial organization, including maintaining and growing a highly experienced and skilled workforce with qualified sales representatives.*

In order to successfully commercialize our products in the United States, we have built a sales force that promotes Afrezza and V-Go to endocrinologists and selected primary care physicians. In order to successfully commercialize any approved products, we must continue to build our sales, marketing, distribution, managerial and other non-technical capabilities. The market for skilled commercial personnel is highly competitive, and we may not be able to hire all of the personnel we need on a timely basis or retain them for a sufficient period. Factors that may hinder our ability to successfully market and commercially distribute our products include:

If we are unable to maintain an effective sales force for our products, including any other potential future approved products, we may not be able to generate sufficient product revenue in the United States. We are required to expend significant time and resources to train our sales force to educate physicians about our products. In addition, we must continually train our sales force and equip them with effective marketing materials to ensure that a consistent and appropriate message about our products is being delivered to our potential customers. We currently have limited resources compared to some of our competitors, and the continued development of our own commercial organization to market our products and any additional products we may develop or acquire will be expensive and time-consuming. We also cannot be certain that we will be able to continue to successfully develop this capability.

Similarly, if UT does not effectively engage or maintain its sales force for Tyvaso DPI, our ability to recognize royalties and manufacturing revenue from this collaboration will be adversely affected.

Manufacturing risks may adversely affect our ability to manufacture our products and Tyvaso DPI, which and could reduce our gross margin and profitability.*

We use our Danbury, Connecticut facility to formulate both the Afrezza and Tyvaso DPI inhalation powders, fill plastic cartridges with the powders, and package the cartridges into secondary packaging. We also assemble the inhalers from their individual molded parts. These semi-finished goods are then assembled into the final kits for commercial sale by a contract packager.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up production to commercial batch sizes. These problems include difficulties with production costs, capacity utilization and yields. We may experience shortages of qualified personnel, which could impact our ability to meet

manufacturing requirements. There is also a need to comply with strictly enforced federal, state and foreign regulations, including inspections. Our facility is inspected on a regular basis by the FDA. If the FDA makes any major observations during future inspections, the corrective actions required could be onerous and time-consuming.

Any of these factors could cause us to delay or suspend production, could entail higher costs and may result in our being unable to obtain sufficient quantities for the commercialization of drug products at the costs that we currently anticipate. Furthermore, if we or a third-party manufacturer fail to deliver the required commercial quantities of the product or any raw material on a timely basis, and at commercially reasonable prices, sustainable compliance and acceptable quality, and we were unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and quality on a timely basis, we would likely be unable to meet demand for such drug products and we would lose potential revenues.

In addition, we rely on our contract manufacturers in Southern China to manufacture V-Go. Our contract manufacturer uses MannKind-owned custom-designed, semi-automated manufacturing equipment and production lines to meet our quality requirements. Separate contract manufacturers in China perform release testing, sterilization, inspection and packaging functions. As a result, our business is subject to risks associated with doing business in China, including:

These risks are likely to be exacerbated by our limited experience with V-Go and its manufacturing processes. As demand increases, we may have to invest additional resources to purchase components, hire and train employees, and enhance our manufacturing processes. If we fail to increase our production capacity efficiently, our sales may not increase in line with our forecasts and our operating margins could fluctuate or decline. In addition, we may be unable to support commercialization of Tyvaso DPI.

If our suppliers fail to deliver materials and services needed for commercial manufacturing in a timely and sufficient manner or fail to comply with applicable regulations, and if we fail to timely identify and qualify alternative suppliers, our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities could decline.*

For the commercial manufacture of inhaled drug products, we need access to sufficient, reliable and affordable supplies of FDKP, the inhaler, the related cartridges and other materials. For Afrezza, we also require a supply of insulin. Currently, the only source of insulin that we have qualified for Afrezza is manufactured by Amphastar. We must rely on all of our suppliers to comply with relevant regulatory and other legal requirements, including the production of insulin and FDKP in accordance with current good manufacturing practices (“cGMP”) for drug products, and the molding of the inhaler and cartridges components in accordance with quality system regulations (“QSRs”).

For V-Go, we obtain parts from a small number of suppliers, including some parts and components that are purchased from single-source vendors. Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. In addition, we do not have long-term supply agreements with most of our suppliers and, in many cases, we make our purchases on a purchase order basis. Under many of our supply agreements, we have no obligation to buy any given quantity of components, and our suppliers have no obligation to manufacture for us or sell to us any given quantity of components.

Because we do not have long-standing relationships with our suppliers, we may not be able to convince them to continue to make components available to us unless there is demand for such components from their other customers. If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors such as the proprietary nature of our product, our quality control standards and regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components.

We may also have difficulty obtaining similar components from other suppliers that meet the requirements of the FDA or other regulatory agencies. Although we conduct our own inspections and review and/or approve investigations of each supplier, there can be no assurance that the FDA, upon inspection, would find that the supplier substantially complies with the QSR or cGMP requirements, where applicable. If a supplier fails to comply with these requirements or the comparable requirements in foreign countries, regulatory authorities may subject us to regulatory action, including criminal prosecutions, fines and suspension of the manufacture of our products. If we are required to find a new or additional supplier, we will need to evaluate that supplier’s ability to provide material that meets regulatory requirements, including cGMP or QSR requirements, as well as our specifications and quality requirements, which would require significant time and expense and could delay production.

As a result, our ability to purchase adequate quantities of the components for our products may be limited. Additionally, our suppliers may encounter problems that limit their ability to manufacture components for us, including financial difficulties or damage to their manufacturing equipment or facilities. In general, if any of our suppliers is unwilling or unable to meet its supply obligations or if we encounter delays or difficulties in our relationships with manufacturers or suppliers, and we are unable to secure an alternative supply source in a timely manner and on favorable terms, our business, financial condition, and results of operations may be harmed and the market price of our common stock and other securities may decline.

If third-party payers do not cover our approved products, such products might not be prescribed, used or purchased, which would adversely affect our revenues.*

In the United States and elsewhere, sales of prescription pharmaceuticals depend in large part on the availability of coverage and adequate reimbursement to the consumer from third-party payers, such as government health administration authorities and private insurance plans. Third-party payers are increasingly challenging the prices charged for medical products and services. The market for our approved products depends significantly on access to third-party payers’ formularies, which are the lists of medications and devices for which third-party payers provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical and device companies. Also, third-party payers may refuse to include a particular branded product in their formularies or otherwise restrict patient access to a branded product when a less costly generic equivalent or other alternative is available. Even if favorable coverage and reimbursement status is attained for our products, less favorable coverage policies and reimbursement rates may be implemented in the future. In addition, because each third-party payer individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming and costly process. We may be required to provide scientific and clinical support for the use of any product to each third-party payer separately with no assurance that approval would be obtained. This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results. Even if we succeed in bringing more products to market, we cannot be certain that any such products would be considered cost-effective or that coverage and adequate reimbursement to the consumer would be available. Patients will be unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payers to contain or reduce the costs of healthcare through various means. In the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, the Inflation Reduction Act, or IRA, which was signed into law in August 2022, limits insulin copays to $35 per month for Medicare Part D beneficiaries starting in 2023. In certain foreign markets the pricing of prescription pharmaceuticals is subject to direct governmental control. The European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

If we or any collaboration or marketing partner is unable to obtain and maintain coverage of, and adequate third-party reimbursement for, our approved products, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our or any collaboration or marketing partner’s ability to successfully commercialize such products and would impact our profitability, results of operations, financial condition, and prospects.

We may need to raise additional capital to fund our operations, and there is substantial doubt about our ability to continue as a going concern.*operations.

~~This report includes disclosures stating that our existing cash resources and our accumulated stockholders’ deficit raise substantial doubt about our ability to continue as a going concern.~~ We ~~will~~may need to raise additional capital, whether through the sale of equity or debt securities, additional strategic business collaborations, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to support our ongoing activities, including the commercialization of ~~Afrezza~~our products and the development of our product candidates, and to avoid defaulting under the financial covenant in the Facility Agreement, which requires us to maintain at least $25.0 million in cash and cash equivalents as of the last day of each fiscal quarter. On June 29, 2017, we entered into the Third Amendment with Deerfield, which, among other things, amended such financial covenant to provide that, if certain conditions remain satisfied, then the obligation to maintain at least $25.0 million in cash and cash equivalents as of the end of each quarter will be reduced to $10.0 million as of the last day of each month through October 31, 2017 and as of December 31, 2017.candidates. It may be difficult for us to raise additional funds on favorable terms, or at all. ~~As of September 30, 2017, we had cash and cash equivalents of $20.1 million (which~~ ~~does not include the approximately $57.7 million of net proceeds we received from the registered offering of our common stock completed in October 2017)~~ ~~and a stockholders’ deficit of $251.0 million.~~ ~~Our cash position, together with our short-term debt obligations and anticipated operating expenses,~~ ~~raises substantial doubt about our ability to continue as a going concern.~~ The extent of our additional funding requirements will depend on a number of factors, including:

We have raised capital in the past through the sale of equity and debt securities and we may in the future pursue the sale of additional equity and/or debt securities, or the establishment of other funding facilities including asset-based borrowings. There can be no assurances, however, that we will be able to raise additional capital in the future on acceptable terms, or at all. Volatility and disruptions of the global supply chain and financial markets, if sustained or recurrent, could prevent us or make it more difficult for us to access capital.

Issuances of additional debt or equity securities or the issuance of common stock upon conversion of outstanding convertible debt securities ~~or upon exercise~~for shares of ~~outstanding warrants~~our common stock could impact the rights of the holders of our common stock and will dilute their ownership percentage. Moreover, the establishment of other funding facilities may impose restrictions on our operations. These restrictions could include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. We may also ~~will need to~~ raise additional capital by pursuing opportunities for the licensing or sale of certain intellectual property and other assets. We cannot offer assurances, however, that any strategic ~~collaborations,~~collaboration, sales of securities or sales or licenses of assets will be available to us on a timely basis or on acceptable terms, if at all. We may be required to enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such relationships may not be on terms as commercially favorable to us as might otherwise be the case.

In the event that sufficient additional funds are not obtained through strategic collaboration opportunities, sales of securities, funding facilities, licensing arrangements, borrowing arrangements and/or asset sales on a timely basis, we may be required to reduce expenses through the delay, reduction or curtailment of our projects, or further reduction of costs for facilities and administration. Moreover, if we do not obtain such additional funds, there will continue to be substantial doubt about our ability to continue as a going concern and increased risk of insolvency and up to total loss of investment to our stockholders and other security holders. As of the date hereof, we have not obtained a solvency opinion or otherwise conducted a valuation of our properties to determine whether our debts exceed the fair value of our property within the meaning of applicable solvency laws. If we are or become insolvent, holders of our common stock or other securities may lose the entire value of their investment.

We cannot provide assurances that changed or unexpected circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. There can be no assurances that we will be able to raise additional capital in sufficient amounts or on favorable terms, or at all. If we are unable to raise adequate additional capital when required or in sufficient amounts or on terms acceptable to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a ~~discount to their fair value or carrying value)~~loss), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue an acquisition of our company at a price that may result in up to a total loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets. ~~In addition, if we default under the Facility Agreement, our senior secured lender, Deerfield, could foreclose on substantially all of our assets.~~

Our prospects are heavily dependent on the successful commercialization of our only approved product, Afrezza. The continued commercialization and development of Afrezza will require substantial capital that we may not be able to obtain.*

We have expended significant time, money and effort in the development of our only approved product, Afrezza. We anticipate that in the near term our prospects and ability to generate significant revenues will heavily depend on our ability to successfully commercialize Afrezza in the United States. We anticipate that our near term revenues will also, to a much lesser extent, depend on our ability to enter into licensing arrangements for our Technosphere platform technology that involve license, milestone, royalty or other payments to us.47

We assumed responsibility for worldwide commercialization of Afrezza in April 2016, prior to which time Sanofi was responsible for global commercial activities for Afrezza. We began distributing Afrezza in the United States in late July 2016, and intend to continue the commercialization of Afrezza in the United States through our own commercial organization. Successful commercialization of Afrezza is subject to many risks and there are many factors that could cause the commercialization of Afrezza to be unsuccessful, including a number of factors that are outside our control. We ultimately may be unable to gain market acceptance of Afrezza for a variety of reasons, including the treatment and dosage regimen, potential adverse effects, relative pricing compared with alternative products, the availability of alternative treatments and lack of coverage or adequate reimbursement.

We have never, as an organization, launched or commercialized a product other than Afrezza, and there is no guarantee that we will be able to successfully do so with Afrezza. There are numerous examples of unsuccessful product launches, second launches that underperform original expectations and other failures to fully exploit the market potential of drug products, including by pharmaceutical companies with more experience and resources than us. During our initial transition of the commercial responsibilities from Sanofi, we utilized a contract sales organization to promote Afrezza while we focused our internal resources on establishing a channel strategy, entering into distribution agreements and developing co-pay assistance programs, a voucher program, data agreements and payor relationships. In early 2017, we recruited our own specialty sales force, which included some of the sales representatives that previously were employed by the contract sales organization. We will need to maintain and continue to build our commercialization capabilities in order to successfully commercialize Afrezza in the United States, and we may not have sufficient resources to do so. The market for skilled commercial personnel is highly competitive, and we may not be able to retain and find and hire all of the personnel we need on a timely basis or retain them for a sufficient period. In addition, Afrezza is a novel insulin therapy with a distinct profile and non-injectable administration, and we are therefore required to expend significant time and resources to train our sales force to be credible, persuasive and compliant with applicable laws in marketing Afrezza for the treatment diabetes to physicians and to ensure that a consistent and appropriate message about Afrezza is being delivered to our potential customers. If we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate potential customers about the benefits of Afrezza and its proper administration, our efforts to successfully commercialize Afrezza could be put in jeopardy, which would negatively impact our ability to generate product revenues.

If we are unable to maintain coverage of, and adequate payment levels for Afrezza, physicians may limit how much or under what circumstances they will prescribe or administer Afrezza. As a result, patients may decline to purchase Afrezza, which would have an adverse effect on our ability to generate revenues.

We are responsible for the NDA for Afrezza and its maintenance. Prior to the termination of the Sanofi License Agreement in April 2016, we had no experience with the maintenance of an NDA and may fail to comply with maintenance requirements, including timely submitting required reports. Furthermore, we are responsible for the conduct of the remaining required post-approval trials of Afrezza. Our financial and other resource constraints may result in delays or adversely impact the reliability and completion of these trials.

Maintaining and further building the internal infrastructure to further develop and commercialize Afrezza is costly and time-consuming, and we may not be successful in our efforts or successful in obtaining financing to support those efforts.

~~If we fail to successfully commercialize Afrezza in the United States, our business, financial condition and results of operations will be materially and adversely affected.~~

We expect that our results of operations will fluctuate for the foreseeable future, which may make it difficult to predict our future performance from period to period.

Our operating results have fluctuated in the past and are likely to do so in future periods. Some of the factors that could cause our operating results to fluctuate from period to period include the factors that will affect our funding requirements described above under “Risk Factors — We ~~will~~may need to raise additional capital to fund our ~~operations,~~operations.” In addition, the current inflationary environment related to increased aggregate demand and ~~there is substantial doubt about~~supply chain constraints has the potential to adversely affect our ~~ability to continue as a going concern.”~~operating expenses.

We believe that comparisons from period to period of our financial results are not necessarily meaningful and should not be relied upon as indications of our future performance.

We have a history of operating losses. We expect to incur losses in the future and we may not generate positive cash flow from operations in the future.*

We are not currently profitable and have rarely generated positive net cash flow from operations. As of June 30, 2023, we had an accumulated deficit of $3.2 billion. The accumulated deficit has resulted principally from costs incurred in our R&D programs, the write-off of assets (including goodwill, inventory and property, plant and equipment) and general operating expenses. We expect to make substantial expenditures and to incur increasing operating losses in the future in order to continue commercializing our products and to advance development of product candidates in our pipeline. In addition, under our Insulin Supply Agreement with Amphastar, we agreed to purchase certain annual minimum quantities of insulin through 2027. As of June 30, 2023, there was approximately $69.2 million remaining in aggregate purchase commitments under this agreement. We may not have the necessary capital resources to service this contractual commitment.

Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity. Our ability to achieve and sustain positive cash flow from operations and profitability depends heavily upon successfully commercializing our products, and although we had positive cash flow from operations during the six months ended June 30, 2023, we may not generate positive cash flow from operations or be profitable in the future.

We may not be able to generate sufficient cash to service all of our indebtedness and commitments.*

Our ability to make scheduled payments on our purchase commitments and debt obligations will depend on our financial and operating performance, which is subject to the commercial success of our products, the extent to which we are able to successfully develop and commercialize additional products, prevailing economic and competitive conditions, and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If we fail to pay interest on, or repay, our outstanding term loan under the MidCap credit facility or borrowings under the Senior convertible notes or the Mann Group convertible note when required, we will be in default under the instrument for such debt securities or loans, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time. If our cash flows and capital resources are insufficient to fund our obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness and lease obligations. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled obligations or that these actions would be permitted under the terms of our future debt agreements. In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations when due. Any of these events could have a material adverse effect on our business, results of operations and financial condition, up to and including the noteholders initiating bankruptcy proceedings or causing us to cease operations altogether.

In addition, the MidCap credit facility requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

We may be required to comply with additional covenants in the future under certain circumstances. The restrictive covenants in the MidCap credit facility could prevent us from pursuing business opportunities that we or our stockholders may consider beneficial.

If our unrestricted cash and short-term investments balance falls below $90.0 million, we will be subject to a covenant relating to trailing twelve-month minimum Afrezza net revenue, tested on a monthly basis, which is set forth in the MidCap credit facility Agreement, as amended. If we fail to meet this covenant, any outstanding borrowings, together with accrued interest, under the MidCap credit facility could be declared immediately due and payable.

A breach of any of these covenants could result in an event of default under the MidCap credit facility. If we default on our obligations under the MidCap credit facility, the lender could proceed against the collateral granted to them to secure our indebtedness or declare all obligations under the MidCap credit facility to be due and payable. In certain circumstances, procedures by the lender could result in a loss by us of all of our equipment and inventory, which are included in the collateral granted to the lender. In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, the holders of secured indebtedness will be entitled to receive payment in full from the proceeds of the collateral securing our secured indebtedness before the holders of other indebtedness or our common stock will be entitled to receive any distribution with respect thereto.

Our business, product sales, results of operations and ability to access capital could be adversely affected by the effects of health pandemics or epidemics, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations.

Our business could be adversely affected by the effects of health pandemics or epidemics in regions where we have business operations, and we could experience significant disruptions in the operations of third-party manufacturers and distributors upon whom we rely. For example, sales and demand for Afrezza were previously adversely affected by the global COVID-19 pandemic, and a resurgence of the COVID-19 pandemic or future pandemics or epidemics could adversely affect the demand for and sales of our products in the future. Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. In particular, our contract manufacturers in China could be impacted by that country’s recent policy of strict lockdowns in order to reduce the spread of disease. Disruptions in sales and demand for our products would be expected to occur:

In addition, clinical trials of our products previously experienced delays as a result of the COVID-19 pandemic and may be affected by a resurgence in the COVID-19 pandemic or a future health pandemic or epidemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the health pandemic or epidemic. Some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff would adversely impact our clinical trial operations.

A pandemic or epidemic also has the potential for disruption of global financial markets. This disruption, if sustained or recurrent, could make it more difficult for us to access capital, which could negatively affect our liquidity. In addition, a recession or market correction as a result of a health pandemic or epidemic could materially affect our business and the value of our common stock.

If we do not obtain regulatory approval of ~~Afrezza~~our products in foreign jurisdictions, we will not be able to market ~~Afrezza~~ in ~~any jurisdiction outside of the United States,~~such jurisdictions, which could limit our commercial revenues. We may not be ~~successful in establishing~~able to establish additional regional partnerships or other arrangements with third parties for the commercialization of ~~Afrezza~~our products outside of the United States.*

~~While~~Although Afrezza has been approved in the United States by the FDA ~~for glycemic control~~and in ~~adult patients with diabetes,~~Brazil by ANVISA, we have not yet ~~sought~~obtained approval in any other ~~jurisdiction~~jurisdiction. Similarly, V-Go has received 510(k) clearance from the FDA, but has not received a comparable approval in any other ~~than Brazil.~~country. In order to market ~~Afrezza outside of the United States,~~our products in a foreign jurisdiction, we must obtain regulatory approval in each ~~applicable~~such foreign jurisdiction, and we may never be able to obtain such approvals. The research, testing, manufacturing, labeling, ~~approval,~~ sale, import, export,

marketing, and distribution of ~~pharmaceutical~~therapeutic products outside the United States are subject to extensive regulation by foreign regulatory authorities, whose regulations differ from country to country. We will be required to comply with the different regulations and policies of the jurisdictions where we seek approval for ~~Afrezza,~~our products, and we have not yet identified all of the requirements that we will need to satisfy to submit ~~Afrezza~~our products for approval for other jurisdictions. This will require additional time, expertise and expense, including the potential need to conduct additional studies or development work for other jurisdictions beyond the work that we have conducted to support the ~~NDA for Afrezza.~~approval of our products in the United States.

Our current strategy for the future commercialization of ~~Afrezza~~our products outside of the United States, subject to receipt of the necessary regulatory approvals, is to seek, establish and ~~establish~~maintain regional partnerships in foreign jurisdictions where there are ~~appropriate~~ commercial opportunities. It may be difficult to find or maintain collaboration partners that are able and willing to devote the time and resources necessary to successfully commercialize ~~Afrezza.~~our products. Collaborations with third parties may require us to relinquish material rights, including revenue from commercialization, agree to unfavorable terms or assume material ongoing development obligations that we would have to fund. These collaboration arrangements are complex and time-consuming to negotiate, and if we are unable to reach agreements with third-party collaborators, we may fail to meet our business objectives and our financial condition may be adversely affected. We may also face significant competition in seeking collaboration partners, ~~especially in the current market,~~ and may not be able to find a suitable collaboration partner in a timely manner on acceptable terms, or at all. Any of these factors could cause delay or prevent the successful commercialization of ~~Afrezza~~our products in foreign jurisdictions and could have a material and adverse impact on our business, financial condition and results of operations and the market price of our common stock and other securities could decline.

WeContinued testing of our products and product candidates may not yield successful results, and even if it does, we may still be ~~successful in our efforts~~unable to ~~develop and~~successfully commercialize our product candidates. *current or future products.

We have generally sought to develop ~~our~~ product candidates through our internal research programs. All ~~of our~~such product candidates will require additional research and development and, in some cases, significant preclinical, clinical and other testing prior to seeking regulatory approval to market them. Accordingly, these product candidates will not be commercially available for a number of years, if at all. Further research and development on these programs will require significant financial resources. Given our limited financial resources, ~~and our focus on development and commercialization of Afrezza,~~ we ~~will~~may not be able to advance these programs into clinical development unless we are able to obtain specific funding for these programs or enter into collaborations with third ~~parties~~parties.

Our research and development programs are designed to ~~fund these programs~~test the safety and efficacy of our product candidates through extensive nonclinical and clinical testing. We may experience numerous unforeseen events during, or ~~to obtain funding to enable us to continue these programs.~~

~~A significant portion~~as a result of, the ~~research~~testing process that could delay or impact commercialization of any of our product candidates, including the following:

As a result of our receipt of an upfront payment and milestone payments from Sanofi. As of September 30, 2017, we had an accumulated deficit of $2.8 billion. The accumulated deficit has resulted principally from costs incurred in our research and development programs, the write-off of goodwill and general operating expenses. We expect to make substantial expenditures and to incur increasing operating losses in the future in order to continue the commercialization of Afrezza. In connection with our quarterly assessment of impairment indicators and inventory valuation for the quarter ended December 31, 2015, we identified an impairment of our long-lived assets and inventory, which resulted in charges of $140.4 million and $36.1 million, respectively, in such quarter. In addition, under the amended Insulin Supply Agreement with

Amphastar, we agreed to purchase certain annual minimum quantities of insulin for calendar years 2017 through 2023 for an aggregate total remaining purchase price of €93.0 million at September 30, 2017. We may not have the necessary capital resources on hand in order to service this contractual commitment.

Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity. As of September 30, 2017, we had stockholders’ deficit of $251.0 million. Our ability to achieve and sustain positive cash flow from operations and profitability depends heavily upon successfully commercializing Afrezza, and we cannot be sure when, if ever, we will generate positive cash flow from operations or become profitable.

We have a substantial amount of debt pursuant to the 2021 notes, 2019 notes, Tranche B notes and The Mann Group Loan Arrangement, and we may be unable to make required payments of interest and principal as they become due.*

~~As of September 30, 2017, we had $167.4 million principal amount of outstanding debt, consisting of:~~

On June 27, 2017, we entered into an agreement with The Mann Group, pursuant to which the parties agreed to, among other things, (i) capitalize $10.7 million of accrued and unpaid interest as of June 30, 2017 under The Mann Group Loan Arrangement, resulting in such amount being classified as outstanding principal under The Mann Group Loan Arrangement, (ii) advance to us approximately $19.4 million, the remaining amount available for borrowing by us under The Mann Group Loan Arrangement after the foregoing capitalization of accrued and unpaid interest, and (iii) defer all interest payable on the outstanding principal under The Mann Group Loan Arrangement until July 1, 2018, unless such payments are otherwise permitted under the subordination agreement with Deerfield, and subject to further deferral pursuant to the terms of the subordination agreement with until our payment obligations to Deerfield have been satisfied in full. There are no additional funds available to borrow under The Mann Group Loan Arrangement. As of September 30, 2017, there was $1.2 million in unpaid interest under The Mann Group Loan Arrangement.

~~There can be no assurance that we will have sufficient resources to make~~ any required repayments of principal under the terms of our indebtedness when required. Further, if we undergo a fundamental change, as that term is defined in the indentures governing the terms of the 2021 notes, or certain Major Transactions as defined in the Facility Agreement in respect of the 2019 notes and the Tranche B notes, the holders of the respective debt securities will have the option to require us to repurchase all or any portion of such debt securities at a repurchase price of 100% of the principal amount of such debt securities to be repurchased plus accrued and unpaid interest, if any. The 2021 notes bear interest at the rate of 5.75% per year on the outstanding principal amount, payable in cash semiannually in arrears on February 15 and August 15 of each year. The 2019 notes bear interest at the rate of 9.75% per year on the outstanding principal amount and the Tranche B notes bear interest at the rate of 8.75% on the outstanding principal amount, with accrued interest on each payable in cash quarterly in arrears on the last business day of March, June, September and December of each year. Outstanding loans under The Mann Group Loan Arrangement accrue interest at a rate of 5.84% per annum, due and payable quarterly in arrears on the first day of each calendar quarter for the preceding quarter, except that The Mann Group has agreed to defer interest payments until July 1, 2018 unless otherwise permitted by the subordination agreement with Deerfield, and such interest payments are subject to additional deferral beyond July 1, 2018 until our payment obligations to Deerfield have been satisfied in full. While we have been able to timely make our required interest payments to date, we cannot guarantee that we will be able to do so in the future. If we fail to pay interest on the 2021 notes, 2019 notes, or Tranche B notes, or if we fail to repay or repurchase the 2021 notes, 2019 notes, Tranche B notes, or the loans under The Mann Group Loan Arrangement when required, we will be in default under the instrument for such debt securities or loans, and may also suffer an event of default under the terms of other borrowing arrangements that we may enter into from time to time. Any of these events, ~~could have a material adverse effect on~~we, any collaborator, the FDA, or any other regulatory authorities, may suspend or terminate clinical studies or marketing of the drug at any time. Any suspension or termination of our clinical studies or marketing activities may harm our business, ~~results of operations and~~ financial condition ~~up to and including the note holders initiating bankruptcy proceedings or causing us to cease operations altogether.~~

The agreements governing our indebtedness contain covenants that we may not be able to meet and place restrictions on our operating and financial flexibility.*

Our obligations under the Facility Agreement, including any indebtedness under the 2019 notes and the Tranche B notes, and the Milestone Agreement are secured by substantially all of our assets, including our intellectual property, accounts receivables, equipment, general intangibles, inventory (excluding the insulin inventory) and investment property, and all of the proceeds and products of the foregoing. Our obligations under the Facility Agreement and the Milestone Agreement are also secured by a certain mortgage on our facility in Danbury, Connecticut. The Facility Agreement includes customary representations, warranties and covenants by us, including restrictions on our ability to incur additional indebtedness, grant certain liens, engage in certain mergers and acquisitions, make certain distributions and make certain voluntary prepayments. Events of default under the Facility Agreement

include: our failure to timely make payments due under the 2019 notes or the Tranche B notes; inaccuracies in our representations and warranties to Deerfield; our failure to comply with any of our covenants under any of the Facility Agreement, Milestone Agreement or certain other related security agreements and documents entered into in connection with the Facility Agreement, subject to a cure period with respect to most covenants; our insolvency or the occurrence of certain bankruptcy-related events; certain judgments against us; the suspension, cancellation or revocation of governmental authorizations that are reasonably expected to have a material adverse effect on our business; the acceleration of a specified amount of our indebtedness; our cash and cash equivalents falling below $25.0 million as of the last day of any fiscal quarter, or pursuant to the Third Amendment, $10.0 million as of the last day of each month through October 31, 2017 and as of December 31, 2017 if certain conditions are met. If we fail to timely pay accrued interest under The Mann Group Loan Arrangement when required, we will be in default under The Mann Group Loan Arrangement. If one or more events of default under the Facility Agreement occurs and continues beyond any applicable cure period, the holders of the 2019 notes and Tranche B notes may declare all or any portion of the 2019 notes and Tranche B notes to be immediately due and payable. The Milestone Agreement includes customary representations and warranties and covenants by us, including restrictions on transfers of intellectual property related to Afrezza. The milestones are subject to acceleration in the event we transfer our intellectual property related to Afrezza in violation of the terms of the Milestone Agreement.

There can be no assurance that we will be able to comply with the covenants under any of the foregoing agreements, and we cannot predict whether the holders of the 2019 notes or Tranche B notes would demand repayment of the outstanding balance of the 2019 notes or the Tranche B notes as applicable or exercise any other remedies available to such holders if we were unable to comply with these covenants. The covenants and restrictions contained in the foregoing agreements could significantly limit our ability to respond to changes in our business or competitive activities or take advantage of business opportunities that may create value for our stockholders and the holders of our other securities. In addition, our inability to meet or otherwise comply with the covenants under these agreements could have an adverse impact on our financial position and results of operations and ~~could result in an event~~the market price of default under the terms of our other indebtedness, including our indebtedness under the 2021 notes. In the event of certain future defaults under the foregoing agreements for which we are not able to obtain waivers, the holders of the 2021 notes, 2019 notes and Tranche B notes may accelerate all of our repayment obligations, and, with respect to the 2019 notes and Tranche B notes, take control of our pledged assets, potentially requiring us to renegotiate the terms of our indebtedness on terms less favorable to us, or to immediately cease operations. If we enter into additional debt arrangements, the terms of such additional arrangements could further restrict our operating and financial flexibility. In the event we must cease operations and liquidate our assets, the rights of any holders of our outstanding secured debt would be senior to the rights of the holders of our unsecured debt and our common stock ~~to receive any proceeds from the liquidation.~~and other securities may decline.

If we do not achieve our projected development goals in the timeframes we expect, our business, financial condition and results of operations will be harmed and the market price of our common stock and other securities could decline.*

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical studies and the submission of regulatory filings. From time to time, we publicly announce the expected timing of some of these milestones. All of these milestones are based on a variety of assumptions. The actual timing of the achievement of these milestones can vary dramatically from our estimates, in many cases for reasons beyond our control, depending on numerous factors, including:

In addition, if we do not obtain sufficient additional funds through sales of securities, strategic collaborations or the license or sale of certain of our assets on a timely basis, we may be required to reduce expenses by delaying, reducing or curtailing our development of product candidates. If we fail to commence or complete, or experience delays in or are forced to curtail, our proposed ~~clinical~~development programs or otherwise fail to adhere to our projected development goals in the timeframes we expect (or within the timeframes expected by analysts or investors), our business, financial condition and results of operations ~~will~~may be harmed and the market price of our common stock and other securities may decline. For example, in June 2023, the contract manufacturer responsible for the production of clofazimine inhalation solution, the investigational product we are developing as MNKD-101, experienced a fire in its manufacturing facility in Germany. As a result of the incident, we estimate the production of clinical supplies of MNKD-101 will be delayed for three to six months, which may impact the initiation of a Phase 2/3 clinical study of MNKD-101 planned for later in 2023. While we are currently evaluating several mitigation strategies, we cannot predict the extent to which such delay will negatively impact our business, financial condition and results of operations. In addition, we may be delayed or prevented from generating revenues from milestone or other payments that depend on our ability to achieve any milestone obligations specified in an out-licensing arrangement.

~~Afrezza~~The long-term safety and efficacy of approved products may differ from clinical studies, which could negatively impact sales and could lead to reputational harm or other negative effects.

The effects of approved therapeutic products over terms longer than the clinical studies or in much larger populations may not be consistent with earlier clinical results. If long-term use of an approved therapeutic product results in adverse health effects or reduced efficacy or both, the FDA or other regulatory agencies may terminate our or any marketing or collaboration partner’s ability to market and sell the product, may narrow the approved indications for use or otherwise require restrictive product labeling or marketing, or may require further clinical studies, which may be time-consuming and expensive and may not produce favorable results.

V-Go received pre-market clearance in 2010 under Section 510(k) of the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA. This process typically requires the submission of less supporting documentation than other FDA approval processes and does not always require long-term clinical studies. As a result, we currently lack significant published long-term clinical data supporting the safety and efficacy of V-Go and the benefits it offers that might have been generated in connection with other approval processes. For these reasons, adults who require insulin and their healthcare providers may be slower to adopt or recommend V-Go, we may not have comparative data that our competitors have or are generating, and third-party payers may not be willing to provide coverage or reimbursement for V-Go. Further, future studies or clinical experience may indicate that treatment with V-Go is not superior to treatment with competitive products. Such results could slow the adoption of V-Go and significantly reduce our sales, which could prevent us from achieving our forecasted sales targets or achieving or sustaining profitability. Moreover, if future results and experience indicate that V-Go causes unexpected or serious complications or other unforeseen negative effects, we could be subject to mandatory product recalls, suspension or withdrawal of FDA clearance or approval, significant legal liability or harm to our business reputation.

We may not realize the benefit of our recent acquisition of V-Go or any future acquisition or strategic transaction; we may be unable to successfully integrate new products or businesses we may acquire.*

We periodically evaluate and pursue acquisition of therapeutic products. We completed the acquisition of V-Go in May 2022 and it remains to be seen whether the acquisition will further our business strategy as anticipated or generate significant revenues. Moreover, the integration of any acquired business, product or other assets into our company may be complex and time-consuming and, if such businesses, products or assets are not successfully integrated, we may not achieve the anticipated benefits, cost-savings or growth opportunities. Potential difficulties that may be encountered in the integration process include the following:

Furthermore, these acquisitions and other arrangements, even if successfully integrated, may fail to further our business strategy as anticipated, expose us to increased competition or challenges with respect to our products or geographic markets, and expose us to additional liabilities associated with an acquired business, product, technology or other asset or arrangement. Any one of these challenges or risks could impair our ability to realize any benefit from our acquisitions or arrangements after we have expended resources on them.

Future acquisitions or dispositions could also result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.

Our products and product candidates may be rendered obsolete by rapid technological change. *

~~A number of established pharmaceutical companies have or are developing technologies for the treatment of unmet medical needs.~~

The rapid rate of scientific discoveries and technological changes could result in ~~Afrezza~~our approved products or one or more of our product candidates becoming obsolete or noncompetitive. Our competitors may develop or introduce new products that render our technology or ~~Afrezza~~products less competitive, uneconomical or obsolete. ~~For example, in September 2017, Novo Nordisk announced that Fiasp~~^®~~, a faster formulation of insulin aspart injection, was approved by the FDA.~~ Our future success ~~will~~may depend not only on our ability to develop our product candidates, but also our ability to improve them ~~and~~in order to keep pace with emerging industry developments. We cannot assure you that we will be able to do so.

We also expect to face competition from universities and other non-profit research organizations. These institutions carry out a significant amount of research and development in various areas of unmet medical need. These institutions are becoming increasingly aware of the commercial value of their findings and are more active in seeking patent and other proprietary rights as well as licensing revenues.

~~Continued testing~~Reports of ~~Afrezza~~side effects or safety concerns in related technology fields or in other companies’ clinical studies could delay or prevent us from obtaining regulatory approval for our product candidates ~~may not yield successful results, and even if it does, we may still be unable~~or negatively impact public perception of our approved products.

There are a number of clinical studies being conducted by other pharmaceutical companies involving compounds similar to, ~~commercialize~~or potentially competitive with, our product candidates.

~~Forecasts about the effects of the use of drugs, including Afrezza, over terms longer than the~~ Adverse results reported by these other companies in their clinical studies or by companies that use our proprietary formulation and inhaler technologies could delay or prevent us from obtaining regulatory approval, may subject our products to class warnings in much larger populations may not be consistent with the earlier clinical results. For example, with the approval of Afrezza, the FDA has required a five-year, randomized, controlled trial in 8,000 — 10,000 patients with type 2 diabetes, the primary objective of which is to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group. If long-term use of a drug results in adverse health effectstheir labels or reduced efficacy or both, the FDA or other regulatory agencies may terminate our or any future marketing partner’s ability to market and sell the drug, may narrow the approved indications for use or otherwise require restrictive product labeling or marketing, or may require further clinical studies, which may be time-consuming and expensive and may not produce favorable results.

~~Our research and development programs are designed to test the safety and efficacy~~negatively impact public perception of our product candidates, ~~through extensive nonclinical and clinical testing. We may experience numerous unforeseen events during, or as a result of, the testing process that~~which could ~~delay or impact commercialization of any of our product candidates, including the following:~~

As a result of any of these events, we, any collaborator, the FDA, or any other regulatory authorities, may suspend or terminate clinical studies or marketing of the drug at any time. Any suspension or termination of our clinical studies or marketing activities may harm our business, financial condition and results of operations and cause the market price of our common stock and other securities ~~may~~to decline.

If our suppliers fail to deliver materials and services needed for the production of Afrezza in a timely and sufficient manner or fail to comply with applicable regulations, and if we fail to timely identify and qualify alternative suppliers, our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities could decline.

For the commercial manufacture of Afrezza, we need access to sufficient, reliable and affordable supplies of insulin, our Afrezza inhaler, the related cartridges and other materials. Currently, the only approved source of insulin for Afrezza is manufactured by Amphastar. We must rely on our suppliers, including Amphastar, to comply with relevant regulatory and other legal requirements, including the production of insulin and FDKP in accordance with the FDA’s cGMP for drug products, and the production of the Afrezza inhaler and related cartridges in accordance with QSRs. The supply of any of these materials may be limited or any of the manufacturers may not meet relevant regulatory requirements, and if we are unable to obtain any of these materials in sufficient amounts, in a timely manner and at reasonable prices, or if we encounter delays or difficulties in our relationships with manufacturers or suppliers, the production of Afrezza may be delayed. Likewise, if Amphastar ceases to manufacture or is otherwise unable to deliver insulin for Afrezza, we will need to locate an alternative source of supply and the production of Afrezza may be delayed. If any of our suppliers is unwilling or unable to meet its supply obligations and we are unable to secure an alternative supply source in a timely manner and on favorable terms, our business, financial condition, and results of operations may be harmed and the market price of our common stock and other securities may decline.

~~If we fail as an effective manufacturing organization or fail to engage third-party manufacturers with this capability, we may be unable to support commercialization of this product.~~

We use our Danbury, Connecticut facility to formulate Afrezza inhalation powder, fill plastic cartridges with the powder, package the cartridges in blister packs, and place the blister packs into foil pouches. We utilize a contract packager to assemble the final kits of foil-pouched blisters containing cartridges along with inhalers and the package insert. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up initial production. These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If we engage a third-party manufacturer, we would need to transfer our technology to that third-party manufacturer and gain FDA approval, potentially causing delays in product delivery. In addition, our third-party manufacturer may not perform as agreed or may terminate its agreement with us.

Any of these factors could cause us to delay or suspend production, could entail higher costs and may result in our being unable to obtain sufficient quantities for the commercialization of Afrezza at the costs that we currently anticipate. Furthermore, if we or a third-party manufacturer fail to deliver the required commercial quantities of the product or any raw material on a timely basis, and at commercially reasonable prices, sustainable compliance and acceptable quality, and we were unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and quality on a timely basis, we would likely be unable to meet demand for Afrezza and we would lose potential revenues.

If Afrezza or any other product that we develop does not become widely accepted by physicians, patients, third-party payors and the healthcare community, we may be unable to generate significant revenue, if any.

Afrezza, and other products that we may develop in the future, may not gain market acceptance among physicians, patients, third-party payors and the healthcare community. Failure to achieve market acceptance would limit our ability to generate revenue and would adversely affect our results of operations.

~~The degree of market acceptance of Afrezza and other products that we may develop in the future depends on many factors, including the:~~

Because of these and other factors, Afrezza and any other product that we develop may not gain market acceptance, which would materially harm our business, financial condition and results of operations.

If third-party payors do not cover Afrezza or any of our product candidates for which we receive regulatory approval, Afrezza or such product candidates might not be prescribed, used or purchased, which would adversely affect our revenues.

Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payors to contain or reduce the costs of healthcare through various means. For example, in certain foreign markets the pricing of prescription pharmaceuticals is subject to governmental control. In the United States, there has been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental controls. We cannot be certain what legislative proposals will be adopted or what actions federal, state or private payors for healthcare goods and services may take in response to any drug pricing and reimbursement reform proposals or legislation. Such reforms may limit our ability to generate revenues from sales of Afrezza or other products that we may develop in the future and achieve profitability. Further, to the extent that such reforms have a material adverse effect on the business, financial condition and profitability of any future marketing partner for Afrezza, and companies that are prospective collaborators for our product candidates, our ability to commercialize Afrezza and our product candidates under development may be adversely affected.

In the United States and elsewhere, sales of prescription pharmaceuticals still depend in large part on the availability of coverage and adequate reimbursement to the consumer from third-party payors, such as governmental and private insurance plans. Third-party payors are increasingly challenging the prices charged for medical products and services. The market for Afrezza and our product candidates for which we may receive regulatory approval will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. In addition, because each third-party payor individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming and costly process. We may be required to provide scientific and clinical support for the use of any product to each third-party payor separately with no assurance that approval would be obtained. This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results. Even if we succeed in bringing more products to market, we cannot be certain that any such products would be considered cost-effective or that coverage and adequate reimbursement to the consumer would be available. Patients will be unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

In addition, in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to government control. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. We may face competition for Afrezza or any of our other product candidates that receives marketing approval from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability.

If we or any future marketing partner is unable to obtain coverage of, and adequate payment levels for, Afrezza or any of our other product candidates that receive marketing approval from third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our and any future marketing partner’s ability to successfully commercialize Afrezza and our ability to successfully commercialize any of our other product candidates that receives regulatory approval and impact our profitability, results of operations, financial condition, and prospects.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that could impact our ability to sell our products profitably. For example, in March 2010, PPACA became law in the United States. PPACA substantially changes the way healthcare is financed by both

~~governmental and private insurers and significantly affects the healthcare industry. Among the provisions of PPACA of importance to us are the following:~~

The medical device excise tax has been suspended by the Consolidated Appropriations Act of 2016 (the “CAA”) through December 31, 2017. Absent further Congressional action, the excise tax will be reinstated for medical device sales beginning January 1, 2018. The CAA also temporarily delays implementation of other taxes intended to help fund PPACA programs.

Some of the provisions of the PPACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In Congress, the U.S. House of Representatives passed PPACA replacement legislation known as the American Health Care Act of 2017 in May 2017, which was not introduced in the Senate. More recently, the Senate Republicans have proposed multiple bills to repeal or repeal and replace portions of the PPACA. Although none of these measures haves been enacted, Congress may consider other legislation to repeal or replace certain elements of the PPACA. On, October 12, 2017, President Trump signed another Executive Order directing certain federal agencies to propose regulations or guidelines to permit small businesses to form association health plans, expand the availability of short-term, limited duration insurance, and expand the use of health reimbursement arrangements, which may circumvent some of the requirements for health insurance mandated by the ACA .In addition, citing legal guidance from the U.S. Department of Justice, the U.S. Department of Health and Human Services, has concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the PPACA have not received necessary appropriations from Congress and announced that it will discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the PPACA. While Congress is considering legislation to appropriate funds for CSR payments the future of that legislation is

~~uncertain. We continue to evaluate the potential effect of the possible repeal and replacement of the PPACA may have on our business.~~

In addition, other legislative changes have been proposed and adopted since PPACA was enacted. For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013, and, following passage of the Bipartisan Budget Act of 2015, will stay in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “ATRA”), which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. These new laws and initiatives may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

We expect that PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

If we or any future marketing partner fails to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a biopharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations, including those pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. For example, we could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include, among others:

Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. To the extent that Afrezza or any of our product candidates that receives marketing approval is ultimately sold in a foreign country, we may be subject to similar foreign laws and regulations. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, individual imprisonment, disgorgement, exclusion of products from reimbursement under U.S. federal or state healthcare programs, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could materially adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the United States, we could be subject to additional reimbursement requirements, fines, sanctions and exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition.

We participate in the Medicaid Drug Rebate Program, as administered by CMS, and other federal and state government pricing programs in the United States, and we may participate in additional government pricing programs in the future. These programs generally require us to pay rebates or otherwise provide discounts to government payors in connection with drugs that are dispensed to beneficiaries/recipients of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing that we report on a monthly and quarterly basis to the government agencies that administer the programs. Pricing requirements and rebate/discount calculations are complex, vary among products and programs, and are often subject to interpretation by governmental or regulatory agencies and the courts. The requirements of these programs, including, by way of example, their respective terms and scope, change frequently. Responding to current and future changes may increase our costs, and the complexity of compliance will be time consuming. Invoicing for rebates is provided in arrears, and there is frequently a time lag of up to several months between the sales to which rebate notices relate and our receipt of those notices, which further complicates our ability to accurately estimate and accrue for rebates related to the Medicaid program as implemented by individual states. Thus, there can be no assurance that we will be able to identify all factors that may cause our discount and rebate payment obligations to vary from period to period, and our actual results may differ significantly from our estimated allowances for discounts and rebates. Changes in estimates and assumptions may have a material adverse effect on our business, results of operations and financial condition.

In addition, the Office of Inspector General of the Department of Health and Human Services and other Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to the methodologies used by manufacturers to calculate average manufacturer price (“AMP”) and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program. We are liable for errors associated with our submission of pricing data and for any overcharging of government payors. For example, failure to submit monthly/quarterly AMP and BP data on a timely basis could result in a civil monetary penalty of $10,000 per day for each day the submission is late beyond the due date. Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the False Claims Act and other laws and regulations. Any required refunds to the U.S. government or responding to a government investigation or enforcement action would be expensive and time consuming and could have a material adverse effect on our business, results of operations and financial condition. In addition, in the event that the CMS were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare for our covered outpatient drugs.

If product liability claims are brought against us, we may incur significant liabilities and suffer damage to our reputation.

The testing, manufacturing, marketing and ~~sale~~sales of ~~Afrezza~~our products and any clinical testing of our product candidates expose us to potential product liability claims. A product liability claim may result in substantial judgments as well as consume significant financial and management resources and result in adverse publicity, decreased demand for a product, injury to our reputation, withdrawal of clinical studies volunteers and loss of revenues. We currently carry worldwide product liability insurance in the amount of $10.0 million as well as an errors and omissions policy in the amount of $1.0 million. Our insurance coverage may not be adequate to satisfy any liability that may arise, and because insurance coverage in our industry can be very expensive and difficult to obtain, we cannot assure you that we will seek to obtain, or be able to obtain if desired, sufficient additional coverage. If losses from such claims exceed our liability insurance coverage, we may incur substantial liabilities that we may not have the resources to pay. If we are required to pay a product liability claim our business, financial condition and results of operations would be harmed and the market price of our common stock and other securities may decline.

If we lose any key employees or scientific advisors, our operations and our ability to execute our business strategy could be materially harmed.

We face intense competition for qualified employees among companies in the biotechnology and biopharmaceutical industries. Our success depends upon our ability to attract, retain and motivate highly skilled employees. We may be unable to attract and retain these individuals on acceptable terms, if at all. In addition, ~~in order to commercialize Afrezza successfully,~~ we may be required to expand our ~~work force, particularly in the areas of manufacturing and sales and marketing.~~workforce. These activities will require the addition of new personnel, including management, and the development of additional expertise by existing personnel, and we cannot assure you that we will be able to attract or retain any such new personnel on acceptable terms, if at all.

The loss of the services of any principal member of our management, commercial and scientific staff could significantly delay or prevent the achievement of our scientific and business objectives. All of our employees are “at will” and we currently do not have employment agreements with any of the principal members of our management, commercial or scientific staff, and we do not have key person life insurance to cover the loss of any of these individuals. Replacing key employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experience required to develop, gain regulatory approval of and commercialize products successfully.

We have relationships with scientific advisors at academic and other institutions to conduct research or assist us in formulating our research, development or clinical strategy. These scientific advisors are not our employees and may have commitments to, and other obligations with, other entities that may limit their availability to us. We have limited control over the activities of these scientific advisors and can generally expect these individuals to devote only limited time to our activities. Failure of any of these persons to devote sufficient time and resources to our programs could harm our business. In addition, these advisors are not prohibited from, and may have arrangements with, other companies to assist those companies in developing technologies that may compete with ~~Afrezza or~~ our ~~product candidates.~~products.

If our internal controls over financial reporting are not considered effective, our business, financial condition and market price of our common stock and other securities could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal controls over financial reporting in our annual report on Form 10-K for that fiscal year. ~~Section 404 also requires our independent registered public accounting firm to attest to, and report on, our internal controls over financial reporting.~~

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud involving a company have been, or will be, detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. A material weakness in our internal controls has been identified in the past, and we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future. A material weakness in our internal controls over financial reporting would require management and our independent registered public accounting firm to evaluate our internal controls as ineffective. If our internal controls over financial reporting are not considered effective, we may experience a loss of public confidence, which could have an adverse effect on our business, financial condition and the market price of our common stock and other securities.

Changes or modifications in financial accounting standards may harm our results of operations.

From time to time, the Financial Accounting Standards Board (“FASB”), either alone or jointly with other organizations, promulgates new accounting principles that could have an adverse impact on our financial position, results of operations and presentation or classification of cash flows. New pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future and as a result we may be required to make changes in our accounting policies. Any difficulties in adopting or implementing new accounting standards, and updating or modifying our internal controls as needed on a timely basis, could result in our failure to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. Finally, if we were to change our critical accounting estimates, including those related to the recognition of collaboration revenue and other revenue sources, our operating results could be significantly affected.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.*

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), the Coronavirus Aid, Relief, and Economic Security Act and the IRA enacted many significant changes to the U.S. tax laws. Further guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets and could increase our future U.S. tax expense.

Effective January 1, 2022, the Tax Act eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted

We may undertake internal restructuring activities in the future that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.

From time to time, we may undertake internal restructuring activities as we continue to evaluate and attempt to optimize our cost and operating structure in light of developments in our business strategy and long-term operating plans. These activities may result in write-offs or other restructuring charges. There can be no assurance that any restructuring activities that we undertake will achieve the cost savings, operating efficiencies or other benefits that we may initially expect. Restructuring activities may also result in a loss of continuity, accumulated knowledge and inefficiency during transitional periods and thereafter. In addition, internal restructurings can require a significant amount of time and focus from management and other employees, which may divert attention from commercial operations. If we undertake any internal restructuring activities and fail to achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.

We and certain of our executive officers and directors have been named as defendants in ongoing securities lawsuits that could result in substantial costs and divert management’s attention.*

Following the public announcement of Sanofi’s election to terminate the Sanofi License Agreement and the subsequent decline in our stock price, two motions were submitted to the District Court at Tel Aviv, Economic Department for the certification of a class action against MannKind and certain of our officers and directors. The complaints alleged that MannKind and certain of our officers and directors violated Israeli and U.S. securities laws by making materially false and misleading statements regarding the prospects for Afrezza, thereby artificially inflating the price of MannKind’s common stock. The plaintiffs are seeking monetary damages. In November 2016, the court in Israel dismissed one of the actions without prejudice. In the remaining action, the district court recently ruled that U.S. law will apply to this case. We are in the process of preparing a response to the plaintiff’s motion to certify the case as a class action. We intend to vigorously defend against these claims. If we are not successful in our defense, we could be forced to make significant payments to or other settlements with our stockholders and their lawyers, and such payments or settlement arrangements could have a material adverse effect on our business, operating results or financial condition. Even if such claims are not successful, the litigation could result in substantial costs and significant adverse impact on our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results and financial condition.

Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.

~~We expect that at~~At least for the foreseeable future, we expect that our manufacturing facility in ~~Danbury,~~ Connecticut will be the sole location for the manufacturing of ~~Afrezza. This facility~~Afrezza and Tyvaso DPI. Similarly, our contract manufacturer in Southern China is the only location for the assembly of V-Go. Additional contract manufacturers in China perform release testing, sterilization, inspection and packaging

functions. These facilities and the specialized manufacturing equipment we use at them would be costly to replace and could require substantial ~~lead time~~lead-time to repair or replace. We depend on our facilities and on collaborators, contractors and vendors for the continued operation of our ~~business, some of whom are located in other countries.~~business. Natural disasters or other catastrophic events, including interruptions in the supply of natural resources, political and governmental changes, severe weather conditions, public health pandemics or epidemics, wars, conflicts (including the current Russia-Ukraine conflict), wildfires and other fires, explosions, actions of animal rights activists, terrorist attacks, volcanic eruptions, earthquakes and wars could disrupt our operations or those of our collaborators, contractors and vendors. We might suffer losses as a result of business interruptions that exceed the coverage available under our and our contractors’ insurance policies or for which we or our contractors do not have coverage. For example, we are not insured against a terrorist attack. Any natural disaster or catastrophic event could have a significant negative impact on our operations and financial results. Moreover, any such event could delay our research and development programs or cause interruptions in our commercialization of ~~Afrezza.~~our products.

We deal with hazardous materials and must comply with environmental laws and regulations, which can be expensive and restrict how we do business. *

Our research and development ~~and commercialization of Afrezza~~ work involves the controlled storage and use of hazardous materials, including chemical and biological materials. ~~In addition, our manufacturing operations involve the use of a chemical that may form an explosive mixture under certain conditions.~~ Our operations also produce hazardous waste products. We are subject to federal, state and local laws and regulations (i) governing how we use, manufacture, store, handle and dispose of these materials (ii) imposing liability for costs of cleaning up, and damages to natural resources from past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (iii) regulating workplace safety. Moreover, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated, and in the event of an accident, we could be held liable for any damages that may result, and any liability could fall outside the coverage or exceed the limits of our insurance. Currently, our general liability policy provides coverage up to $1.0 million per occurrence and $2.0 million in the aggregate and is supplemented by an umbrella policy that provides a further $20.0 million of coverage; however, our insurance policy excludes pollution liability coverage and we do not carry a separate hazardous materials policy. In addition, we could be required to incur significant costs to comply with environmental laws and regulations in the future. Finally, current or future environmental laws and regulations may impair our research, development or production efforts or have an adverse impact on our business, results of operations and financial condition.

When we purchased ~~the facilities located~~our facility in ~~Danbury,~~ Connecticut in 2001, a soil and groundwater investigation and remediation was being conducted by a former site operator ~~(the responsible party)~~(a “responsible party”) under the oversight of the Connecticut Department of Energy & Environmental Protection (formerly the Connecticut Department of Environmental Protection), which investigation and remediation is ~~not completed.~~ongoing. The former site operator and responsible party will make ~~all~~further filings necessary to achieve closure for the environmental investigation and remediation it has conducted at the site, and has agreed to indemnify us for any future costs and expenses we may incur that are directly related to its prior operations at the ~~final closure.~~facility. If we are unable to collect these future costs and expenses, if any, from the responsible party, our business, financial condition and results of operations may be harmed. When we sold a portion of the property upon which our facility is located to the entity that is now our landlord, we became an additional responsible party for any environmental investigation and remediation on that portion of the property, including with respect to investigation or remediation that may be required as a result of our activities since 2001. To date, we have not identified any material environmental investigation or remediation activities that we are required to perform.

~~We are increasingly dependent on~~If our information technology systems ~~infrastructure~~or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and ~~data security.~~penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.*

We, and third parties acting on our behalf, employ and are increasingly dependent upon information technology systems, infrastructure, applications, websites and ~~data security.~~other resources. Our business requires collecting, receiving, manipulating, analyzing, storing, processing, generating, using, disclosing, protecting, securing, transmitting, sharing, disposing of, and ~~storing~~making accessible (collectively “processing”) large amounts of ~~data. In addition,~~data, including proprietary, confidential and sensitive data (such as personal or health-related data), intellectual property, and trade secrets (collectively, “sensitive information”).

Cyber-attacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and continue to increase are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors, for geopolitical reasons and in conjunction with military conflicts and defense activities. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credentials harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent

and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. Some of our workforce works remotely, which also poses increased risks to our information technology systems and data, as employees working from home, in transit or in public locations, utilize network connections, computers and devices outside our premises or network. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We may rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions. We may also rely on third-party service providers to provide other products or services, or otherwise to operate our business. For example, we rely on an enterprise software system to operate and manage our business. Our business, including our ability to manufacture drug products and conduct clinical trials, therefore depends on the continuous, effective, reliable and secure operation of our information technology resources and those of third parties acting on our behalf, including computer hardware, software, networks, Internet servers and related infrastructure. ~~The multitude~~Our ability to monitor these third parties’ information security practices is limited, and ~~complexity of~~these third parties may not have adequate information security measures in place. If our ~~computer systems~~third-party service providers experience a security incident or other interruption, we could experience adverse consequences. In particular, supply-chain attacks have increased in frequency and ~~the potential value of~~severity, and we cannot guarantee that third parties and infrastructure in our data make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack. Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data including intellectual property, trade secrets or personal information belonging to ussupply chain or our ~~customers~~third-party partners’ supply chains have not been compromised or ~~other business partners may be exposed~~that they do not contain exploitable defects or bugs that could result in a breach of or disruption to unauthorized persons or to the public. Our systems are also potentially subject to cyber-attacks, which can be highly sophisticated and may be difficult to detect. Such attacks are often carried out by motivated, well-resourced, skilled and persistent actors including nation states, organized crime groups and “hacktivists.” Cyber-attacks could include the deployment of harmful malware and key loggers, a denial-of-service attack, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our information technology systems ~~infrastructure~~(including our products) or the third-party information technology systems that support us and ~~data. Our key business partners face similar risks and any security breach of their systems could adversely affect~~ our ~~security status.~~services. While we ~~continue~~may be entitled to ~~invest~~damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in ~~the protection~~unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our ~~critical~~sensitive information or ~~sensitive data and~~our information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products. We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standards or reasonable security measures to protect our information technology systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. These vulnerabilities pose material risks to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. We have in the past experienced security incident(s). For example, like many companies, we use SolarWinds to help manage our information technology systems. A cyber-attack on SolarWinds was discovered in December 2020 and widely exploited by threat actors. Upon learning of this vulnerability, we applied the software patch provided by SolarWinds and remediated the incident. The incident did not appear to have any negative impact on our operations or the sensitive information we may process. In addition, a ransomware attack on Ultimate Kronos Group’s (“UKG”) Kronos Private Cloud service was discovered in December 2021. At the time, we used UKG Pro, a product offered through UKG that is not in the Kronos Private Cloud, for human capital management. UKG is not aware of an impact on UKG Pro and the incident did not appear to have any negative impact on our operations or the sensitive information we may process. Thus, despite our efforts ~~will prevent or detect service interruptions or breaches~~to identify and remediate vulnerabilities, if any, in our information technology systems, our efforts may not be successful.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business. Additionally, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our cybersecurity

insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Sensitive information of the Company or our customers could also be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s, or vendor’s use of generative AI technologies.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and our financial condition and results of operations.*

Adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to bank failures and market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. In addition, on May 1, 2023, the FDIC seized First Republic Bank and sold its assets to JPMorgan Chase & Co. While the U.S. Department of Treasury, FDIC and Federal Reserve Board have implemented a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program, there is no guarantee that such programs will be sufficient. Additionally, it is uncertain whether the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

While we have not experienced any adverse impact to our liquidity or to our current and projected business operations, financial condition or results of operations as a result of the matters relating to SVB, Signature Bank, Silvergate Capital Corp and First Republic Bank, uncertainty remains over liquidity concerns in the broader financial services industry, and our business, our business partners or industry as a whole may be adversely impacted in ways that we cannot predict at this time.

Although we assess our banking relationships as we believe necessary or appropriate, our access to cash in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the financial institutions with which we have banking relationships. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could also include factors involving financial markets or the financial services industry generally. The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets; or termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, widespread investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.*

We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash held in these accounts often exceed the FDIC insurance limits. If such banking institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limitations. As noted above, the FDIC recently took control of SVB, Signature Bank, Silvergate Capital Corp and First Republic Bank. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and ~~operations and/or result in the loss of critical or sensitive information, which could result in~~ financial ~~legal, business or reputational harm to us.~~position.

Our product candidates must undergo costly and time-consuming rigorous nonclinical and clinical testing and we must obtain regulatory approval prior to the sale and marketing of any product in each jurisdiction. The results of this testing or issues that develop in the review and approval by a regulatory agency may subject us to unanticipated delays or prevent us from marketing any products.

Our research and development activities for product candidates, as well as the manufacturing and marketing of ~~Afrezza and our product candidates,~~approved products, are subject to regulation, including regulation for safety, efficacy and quality, by the FDA in the United States and comparable authorities in other countries. FDA regulations and the regulations of comparable foreign regulatory authorities are wide-ranging and govern, among other things:

The requirements governing the conduct of clinical studies ~~and~~as well as the manufacturing and marketing of ~~Afrezza and our product candidates~~drug products outside the United States vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can require, among other things, additional testing and different clinical study designs. Foreign regulatory approval processes include essentially all of the risks associated with the FDA approval processes. Some of those agencies also must approve prices of the products. Approval of a product by the FDA does not ensure approval of the same product by the health authorities of other countries. In addition, changes in regulatory policy in the United States or in foreign countries for product approval during the period of product development and regulatory agency review of each submitted new application may cause delays or rejections.

Clinical testing can be costly and take many years, and the outcome is uncertain and susceptible to varying interpretations. We cannot be certain if or when regulatory agencies might request additional studies, under what conditions such studies might be requested, or what the size or length of any such studies might be. The clinical studies of our product candidates may not be completed on schedule, regulatory agencies may order us to stop or modify our research, or these agencies may not ultimately approve any of our

product candidates for commercial sale. The data collected from our clinical studies may not be sufficient to support regulatory approval of our product candidates. Even if we believe the data collected from our clinical studies are sufficient, regulatory agencies have substantial discretion in the approval process and may disagree with our interpretation of the data. Our failure to adequately demonstrate the safety and efficacy of any of our product candidates would delay or prevent regulatory approval of our product candidates, which could prevent us from achieving profitability.

Questions that have been raised about the safety of marketed drugs generally, including pertaining to the lack of adequate labeling, may result in increased cautiousness by regulatory agencies in reviewing new drugs based on safety, efficacy, or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Such regulatory considerations may also result in the imposition of more restrictive drug labeling or marketing requirements as conditions of approval, which may significantly affect the marketability of our drug products.

The FDA and other regulatory authorities impose significant restrictions on approved products through regulations on advertising, promotional and distribution activities. This oversight encompasses, but is not limited to, direct-to-consumer advertising, healthcare provider-directed advertising and promotion, sales representative communications to healthcare professionals, promotional programming and promotional activities involving the Internet. Regulatory authorities may also review industry-sponsored scientific and educational activities that make representations regarding product safety or efficacy in a promotional context. The FDA and other regulatory authorities may take enforcement action against a company for promoting unapproved uses of a product or for other violations of its advertising and labeling laws and regulations. Enforcement action may include product seizures, injunctions, civil or criminal penalties or regulatory letters, which may require corrective advertising or other corrective communications to healthcare professionals. Failure to comply with such regulations also can result in adverse publicity or increased scrutiny of company activities by the U.S. Congress or other legislators. Certain states have also adopted regulations and reporting requirements surrounding the promotion of pharmaceuticals. Failure to comply with state requirements may affect our ability to promote or sell our products in certain states.58

If we do not comply with regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be fined or forced to remove a product from the market, subject to criminal prosecution, or experience other adverse consequences, including restrictions or delays in obtaining regulatory marketing approval.

Even if we comply with regulatory requirements, we may not be able to obtain the labeling claims necessary or desirable for product promotion. We may also be required to undertake post-marketing studies. For example, as part of the approval of Afrezza, the FDA required that we complete a clinical trial to evaluate the potential risk of pulmonary malignancy with Afrezza. To date, we have not enrolled any subjects in this trial.

In addition, if we or other parties identify adverse effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and a reformulation of our products, additional clinical studies, changes in labeling of, or indications of use for, our products and/or additional marketing applications may be required. If we encounter any of the foregoing problems, our business, financial condition and results of operations will be harmed and the market price of our common stock and other securities may decline.

The ~~manufacture, marketing~~FDA and ~~sale of Afrezza are~~comparable foreign regulatory authorities subject any approved therapeutic product to ~~stringent~~extensive and ongoing ~~government regulation. The FDA may also withdraw product approvals if problems~~regulatory requirements concerning the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems, including adverse events of unanticipated severity or ~~efficacy~~frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

We also are required to register our establishments and list our products with the FDA and certain state agencies. We and any third-party manufacturers or suppliers must continually adhere to federal regulations setting forth ~~requirements, known as~~ cGMP (for drugs) and QSR (for medical devices), and their foreign equivalents, which are enforced by the FDA and other national regulatory bodies through their facilities inspection programs. In complying with cGMP and foreign regulatory requirements, we and any of our ~~potential~~ third-party manufacturers or suppliers will be obligated to expend time, money and effort in production, record-keeping and quality control to ensure that our products meet applicable specifications and other requirements. QSR requirements also impose extensive testing, control and documentation requirements. State regulatory agencies and the regulatory agencies of other countries have similar requirements. In addition, we will be required to comply with regulatory requirements of the FDA, state regulatory agencies and the regulatory agencies of other countries concerning the reporting of adverse events and device malfunctions, corrections and removals (e.g., recalls), promotion and advertising and general prohibitions against the manufacture and distribution of adulterated and misbranded devices. Failure to comply with these regulatory requirements could result in significant civil fines, product seizures,

injunctions and/or criminal prosecution of responsible individuals and us. Any such actions would have a material adverse effect on our business, financial condition and results of operations.

As part of the approval of Afrezza, the FDA required us to conduct certain additional clinical studies of Afrezza. One of these studies, a Phase 3 clinical trial to evaluate the safety and efficacy of Afrezza in 4-17 year-old children and adolescents, is ongoing. The other required study is a long-term safety study that was originally intended to compare the incidence of pulmonary malignancy observed with Afrezza to that observed in a standard of care control group. We have an ongoing dialogue with the FDA regarding the agency’s current interest in the long-term safety of Afrezza and an appropriate study design to address any concerns. To date, we have not commenced a long-term safety study or budgeted any amount for it, but such a study in its original design would be anticipated to require substantial capital resources that we may not be able to obtain.

The FDA and ~~comparable foreign~~other regulatory authorities ~~subject Afrezza~~impose significant restrictions on approved products through regulations on advertising, promotional and ~~any~~distribution activities. This oversight encompasses, but is not limited to, direct-to-consumer advertising, healthcare provider-directed advertising and promotion, sales representative communications to healthcare professionals, promotional programming and promotional activities involving the Internet. Regulatory authorities may also review industry-sponsored scientific and educational activities that make representations regarding product safety or efficacy in a promotional context. Prescription drugs may be promoted only for the approved ~~drug product to extensive and ongoing regulatory requirements concerning~~indications in accordance with the ~~manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping. These requirements include submissions of safety~~approved label. The FDA and other ~~post-marketing information~~regulatory authorities

may take enforcement action against a company for promoting unapproved uses of a product or for other violations of its advertising and ~~reports, registration, as well as continued compliance with cGMPs~~labeling laws and ~~GCP requirements~~regulations. However, physicians may, in their independent medical judgment, prescribe legally available products for ~~any clinical trials that we conduct post-approval. Later discovery~~off-label uses. The FDA does not regulate the behavior of ~~previously unknown problems, including adverse events~~physicians in their choice of ~~unanticipated severity~~treatments, but the FDA does restrict manufacturer’s communications on the subject of off-label use of their products. Enforcement action may include product seizures, injunctions, significant civil or ~~frequency,~~criminal penalties or ~~with our third-party manufacturers~~regulatory letters, which may require corrective advertising or ~~manufacturing processes, or failure~~other corrective communications to healthcare professionals. Failure to comply with ~~regulatory~~such regulations also can result in adverse publicity or increased scrutiny of company activities by the U.S. Congress or other legislators. Certain states have also adopted regulations and reporting requirements surrounding the promotion of pharmaceuticals. Failure to comply with state requirements may ~~result~~affect our ability to promote or sell our products in ~~among other things:~~certain states.

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product ~~candidates.~~ candidates, delay the submission or review of an application or require additional expenditures by us. In addition, interested parties (such as individuals, advocacy groups and competing pharmaceutical companies) can file a citizen petition with the FDA to request policy change or some form of administrative action on the FDA’s part, including with respect to an NDA. For example, in July 2021, a third party submitted a citizen petition to the FDA requesting that the FDA refuse to approve Tyvaso DPI, and/or impose additional requirements in order to approve the product. This prompted the FDA to request additional information concerning Tyvaso DPI prior to granting approval in May 2022. If successful, a citizen petition can significantly delay, or even prevent, the approval of a drug product.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. We also cannot be sure that actions by foreign regulatory bodies pertaining to the safety of drugs or medical devices will not adversely affect our operations. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be denied marketing approval or lose any marketing approval that we have already obtained. There can be no assurance that we will be able to obtain necessary regulatory clearances or approvals on a timely basis, if at all, for any of our product candidates under development, and delays in receipt or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or failure to comply with existing or future regulatory requirements could have a material adverse effect on our business and results of operations.

In both the United States and certain foreign jurisdictions, there has been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that could impact our ability to sell our products profitably. The most recent significant healthcare legislation was the Patient Protection and Affordable Care Act, as amended by the Health Care Education and Reconciliation Act (collectively, the “PPACA”), enacted in March 2010, which substantially changed the way healthcare is financed by both governmental and private insurers and continues to significantly affect the healthcare industry. There have ~~obtained~~been executive, judicial and congressional challenges to certain provisions of the PPACA, although the constitutionality of the PPACA appears to now be settled. In addition, there have been proposed and enacted health reform initiatives affecting the PPACA. For example, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025, eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program, and caps the out-of-pocket cost of insulin (including Afrezza) at $35 per month for Medicare recipients beginning in 2023. It is possible that the PPACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges, other litigation, and the healthcare reform measures of the current administration will impact the PPACA.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Specifically, there have been several recent U.S. Presidential executive orders, Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. These new laws and initiatives may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

Our future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of government and other third-party payers to contain or reduce the costs of healthcare through various means. In the United States, there have been several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services (“HHS”) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these

principles. In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although the Medicare drug price negotiation program is currently subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that there will continue to be a number of federal and state proposals to implement similar and/or additional governmental controls. We cannot be certain what legislative proposals will be adopted or what actions federal, state or private third-party payers may take in response to any drug pricing and reimbursement reform proposals or legislation. Further, to the extent that such reforms have a material adverse effect on our ability to commercialize our products and product candidates under development, our business, financial condition and profitability may be adversely affected.

We expect that PPACA, the IRA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

If we or any future partner fails to comply with federal and state healthcare laws, including fraud and abuse and health information laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a biopharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations, including those pertaining to fraud and abuse and patients’ rights, are and will be applicable to our business. The number and scope of these laws, regulations and industry standards are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with each other, making compliance difficult. The key laws that may affect our ability to operate include, among others:

Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. With Afrezza approved in Brazil and as we pursue additional international approvals, we will be subject to similar foreign laws and regulations. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, or any contractual obligations related to the same, we may be subject to governmental enforcement actions, investigations, litigation (including class action lawsuits) and other penalties, including significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, defense costs, exclusion from U.S. federal or state healthcare programs, additional reporting requirements and/or oversight (including if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws), bans or restrictions on our processing of personal data, indemnity obligations and the curtailment or restructuring of our operations. Any such event or consequence, including penalties, damages, fines, and curtailment or restructuring of our operations, could materially adversely affect our ability to operate our business, including our ability to run clinical trials, and our financial results and harm our reputation. Although compliance programs can help mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly.

We are subject to stringent and changing U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.*

In the ordinary course of business, we process sensitive information (as those terms are defined above). Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information. In addition, the CCPA imposes obligations on covered businesses, including, but not limited to, providing specific disclosures in privacy notices and affording California consumers, business representatives, and employees who are California residents certain rights related to their personal data. The CCPA provides for administrative fines (up to $7,500 per violation) and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data we maintain about California residents. In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became operative January 1, 2023, expanded the CCPA’s requirements, including by adding a new right for individuals to correct their personal information and establishing a new California Privacy Protection Agency to implement and enforce the CPRA. Other states also have enacted comprehensive data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which became effective in 2023. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers. In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.

Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the General Data Protection Regulation (“GDPR”) and, the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data

Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and Australia’s Privacy Act, impose strict requirements for processing personal data. For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater; or private litigation related to the processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

Our employees and personnel may use generative artificial intelligence (“AI”) technologies to perform their work, and the disclosure and use of personal information in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and consumer lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (EEA) and the United Kingdom (UK) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these reasons to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. In addition, privacy advocates and industry groups have proposed, and may propose, standards with which we are legally or contractually bound to comply, or may become subject to in the future.

Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture. If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, as relevant, clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.

exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition.*

We participate in the Medicaid Drug Rebate Program, as administered by CMS, and other federal and state government pricing programs in the United States, and we may ~~not achieve~~participate in additional government pricing programs in the future. These programs generally require us to pay rebates or ~~sustain profitability.~~

~~Our suppliers~~otherwise provide discounts to government payers in connection with drugs that are dispensed to beneficiaries/recipients of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing that we report on a monthly and quarterly basis to the government agencies that administer the programs. Pricing requirements and rebate/discount calculations are complex, vary among products and programs, and are often subject to ~~FDA inspection.~~

~~We depend on suppliers~~interpretation by governmental or regulatory agencies and the courts. The requirements of these programs, including, by way of example, their respective terms and scope, change frequently. For example, in March 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s AMP, for ~~insulin~~single source and ~~other materials that comprise Afrezza, including~~innovator multiple source drugs, beginning January 1, 2024. Responding to current and future changes may increase our ~~Afrezza inhaler~~costs, and ~~cartridges. Each supplier must comply with relevant regulatory requirements~~the complexity of compliance will be time consuming. Invoicing for rebates is provided in arrears, and there is ~~subject~~frequently a time lag of up to ~~inspection~~several months between the sales to which rebate notices relate and our receipt of those notices, which further complicates our ability to accurately estimate and accrue for rebates related to the Medicaid program as implemented by ~~the FDA. Although we conduct our own inspections and review and/or approve investigations of each supplier,~~individual states. Thus, there can be no assurance that the FDA, upon inspection, would find that the supplier substantially complies with the QSR or cGMP requirements, where applicable. If we or any potential third-party manufacturer or supplier fails to comply with these requirements or comparable requirements in foreign countries, regulatory authorities may subject us to regulatory action, including criminal prosecutions, fines and suspension of the manufacture of our products.

~~If we are required to find a new or additional supplier of insulin,~~ we will be ~~required~~able to ~~evaluate the new supplier’s ability~~identify all factors that may cause our discount and rebate payment obligations to ~~provide insulin that meets regulatory requirements, including cGMP requirements as well as~~vary from period to period, and our ~~specifications~~actual results may differ significantly from our estimated allowances for discounts and ~~quality requirements, which would require significant time~~rebates. Changes in estimates and ~~expense and could delay the manufacturing and commercialization of Afrezza.~~

~~Reports of side effects or safety concerns in related technology fields or in other companies’ clinical studies could delay or prevent us from obtaining regulatory approval for~~assumptions may have a material adverse effect on our ~~product candidates or negatively impact public perception of Afrezza or any other products we may develop.~~

If other pharmaceutical companies announce that they observed frequent adverse events in their studies involving insulin therapies, we may be subject to class warnings in the label for Afrezza. In addition, the public perception of Afrezza might be adversely affected, which could harm our business, ~~financial condition and~~ results of operations and ~~cause~~financial condition.

In addition, the ~~market price~~Office of ~~our common stock~~Inspector General of the HHS and other ~~securities~~Congressional, enforcement and administrative bodies have recently increased their focus on pricing requirements for products, including, but not limited to ~~decline, even if~~ the ~~concern relates~~methodologies used by manufacturers to ~~another company’s products or product candidates.~~

~~There~~calculate AMP and best price (“BP”) for compliance with reporting requirements under the Medicaid Drug Rebate Program. We are ~~also a number of clinical studies being conducted by other pharmaceutical companies involving compounds similar to, or potentially competitive~~liable for errors associated with our ~~product candidates. Adverse results reported by these~~submission of pricing data and for any overcharging of government payers. For example, failure to submit monthly/quarterly AMP and BP data on a timely basis could result in a civil monetary penalty. Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the False Claims Act and other ~~companies in their clinical studies~~laws and regulations. Any required refunds to the U.S. government or responding to a government investigation or enforcement action would be expensive and time consuming and could ~~delay or prevent us from obtaining regulatory approval or negatively impact public perception of~~have a material adverse effect on our ~~product candidates, which could harm our~~ business, ~~financial condition and~~ results of operations and ~~cause~~financial condition. In addition, in the ~~market price~~event that the CMS were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare for our covered outpatient drugs.

Our business could be negatively impacted by environmental, social and corporate governance (ESG) matters or our reporting of such matters.

There is an increasing focus from certain investors, employees, partners, and other stakeholders concerning ESG matters. We may be, or be perceived to be, not acting responsibly in connection with these matters, which could negatively impact us. Moreover, the SEC has recently proposed, and may continue to propose, certain mandated ESG reporting requirements, such as the SEC’s proposed rules designed to enhance and standardize climate-related disclosures, which, if finally approved, would significantly increase our compliance and reporting costs and may also result in disclosures that certain investors or other stakeholders deem to negatively impact our reputation and/or that harm our stock price. We currently do not report our environmental emissions and absent a legal requirement to do so we currently do not plan to report our environmental emissions, and lack of reporting could result in certain investors declining to invest in our common stock.

Our portfolio of investment securities may require us to register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940 (“‘40 Act”).

The rules and interpretations of the SEC and the courts relating to the definition of "investment company" are very complex. Although we are a biopharmaceutical company and we do not hold ourselves out as an investment company, the value of our ~~common stock~~investment securities relative to our total assets (exclusive of government securities and cash items) has in the past exceeded safe harbor limits prescribed in the ’40 Act. If our asset mix does not continue to qualify for one of the safe harbor limits prescribed in the ‘40 Act, it is possible that the SEC would take the position that we would be required to register under the ‘40 Act and comply with the ‘40 Act’s registration and reporting requirements, capital structure requirements, affiliate transaction restrictions, conflict of interest rules, requirements for disinterested directors, and other ~~securities~~substantive provisions. If we were required to ~~decline.~~register as an “investment company” and be subject to the restrictions of the ‘40 Act, those restrictions likely would require significant changes in the way we do business and add significant administrative costs and burdens to our operations.

If we are unable to protect our proprietary rights, we may not be able to compete effectively, or operate profitably.

Our commercial success depends, in large part, on our ability to obtain and maintain intellectual property protection for our technology. Our ability to do so will depend on, among other things, complex legal and factual questions, and it should be noted that

the standards regarding intellectual property rights in our fields are still evolving. We attempt to protect our proprietary technology through a combination of patents, trade secrets and confidentiality agreements. We own a number of domestic and international patents, have a number of domestic and international patent applications pending and have licenses to additional patents. We cannot assure you that our patents and licenses will successfully preclude others from using our technologies, and we could incur substantial costs in seeking enforcement of our proprietary rights against infringement. Even if issued, the patents may not give us an advantage over competitors with alternative technologies.

For example, the coverage claimed in a patent application can be significantly reduced before a patent is issued, either in the United States or abroad. Statutory differences in patentable subject matter may limit the protection we can obtain on some of our inventions outside of the United States. For example, methods of treating patients are not patentable in many countries outside of the United States. These and other issues may limit the patent protection we are able to secure internationally. Consequently, we do not know whether any of our pending or future patent applications will result in the issuance of patents or, to the extent patents have been issued or will be issued, whether these patents will be subjected to further proceedings limiting their scope, will provide significant proprietary protection or competitive advantage, or will be circumvented or invalidated.

Furthermore, patents already issued to us or our pending applications may become subject to disputes that could be resolved against us. In the United States and certain other countries, applications are generally published 18 months after the application’s priority date. Because publication of discoveries in scientific or patent literature often trails behind actual discoveries, we cannot be certain that we were the first inventor of the subject matter covered by our pending patent applications or that we were the first to file patent applications on such inventions. Assuming the other requirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (“AIA”), the United States moved to a first inventor to file system. In general, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

Moreover, the term of a patent is limited and, as a result, the patents protecting our products expire at various dates. For example, some patents providing protection for Afrezza inhalation powder have terms extending into 2020, 2026, 2028, 2029, and 2030. In addition, patents providing protection for our inhaler and cartridges have terms extending into 2023, 2031 and 2032, and we have method of treatment claims that extend into 2026, 2029, 2030 and 2031. As and when these different patents expire, ~~Afrezza~~our products could become subject to increased competition. As a consequence, we may not be able to recover our development costs.

An issued patent is presumed valid unless it is declared otherwise by a court of competent jurisdiction. However, the issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be afforded by our patents. A third party may challenge the validity or enforceability of a patent after its issuance by various proceedings such as oppositions in foreign jurisdictions, or post grant proceedings, including, oppositions, re-examinations or other review in the United States. In some instances, we may seek re-examination or reissuance of our own patents. If we attempt to enforce our patents, they may be challenged in court where they could be held invalid, unenforceable, or have their breadth narrowed to an extent that would destroy their value.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming the other requirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (“AIA”), or the Leahy-Smith Act, enacted on September 16, 2011, the United States moved to a first inventor to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. The full effects of these changes are currently unclear. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

Moreover, patent law continues to evolve. Several further changes to patent law are before Congress. The United States Supreme Court has exhibited an increased interest in patent law and several of its recent decisions have tended to narrow the scope of patentable subject matter related to medical products and methods. These and recent decisions of lower courts and guidelines issued by the USPTO call into question the patentability of biological inventions that had previously been considered patentable. While none of this has had an immediately apparent impact on our core technology and patents, the full and ultimate effect of these developments is not yet known. We also rely on unpatented technology, trade secrets, know-how and confidentiality agreements. We require our officers, employees, consultants and advisors to execute proprietary information and invention and assignment agreements upon commencement of their relationships with us. These agreements provide that all inventions developed by the individual on behalf of us must be assigned to us and that the individual will cooperate with us in connection with securing patent protection on the invention if we wish to pursue such protection. We also execute confidentiality agreements with outside collaborators. ~~There~~However, disputes may arise as to the ownership of proprietary rights to the extent that outside collaborators apply technological information to our projects that are developed independently by them or others, or apply our technology to outside projects, and there can be no assurance that any such disputes would be resolved in our favor. In addition, any of these parties may breach the agreements and disclose our confidential information or our competitors might learn of the information in some other way. Thus, there can be no assurance, however, that our inventions and assignment agreements and our confidentiality agreements will provide meaningful protection for our inventions, trade secrets, know-how or other proprietary information in the event of unauthorized use or disclosure of such information. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business, results of operations and financial condition could be adversely affected.

If we become involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors, we would be required to devote substantial time and resources to prosecute or defend such proceedings.

Competitors may infringe our patents or the patents of our collaborators or licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. A court may also decide to award us a royalty from an infringing party instead of issuing an injunction against the infringing activity. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings brought by the USPTO, may be necessary to determine the priority of inventions with respect to our pre-AIA patent applications or those of our collaborators or licensors. Additionally, the ~~Leahy-Smith Act~~AIA has greatly expanded the options for post-grant review of patents that can be brought by third parties. In particular, Inter Partes Review (“IPR”), available against any issued United States patent ~~(pre—and~~(pre-and post-AIA), has resulted in a higher rate of claim invalidation, due in part to the much reduced opportunity to repair claims by amendment as compared to re-examination, as well as the lower standard of proof used at the USPTO as compared to the federal courts. With the passage of time an increasing number of patents related to successful pharmaceutical products are being subjected to IPR. Moreover, the filing of IPR petitions has been used by short-sellers as a tool to help drive down stock prices. We may not prevail in any litigation, post-grant review, or interference proceedings in which we are involved and, even if we are successful, these proceedings may result in substantial costs and be a distraction to our management. Further, we may not be able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, the market price of our common stock and other securities may decline.

If our technologies conflict with the proprietary rights of others, we may incur substantial costs as a result of litigation or other proceedings and we could face substantial monetary damages and be precluded from commercializing our products, which would materially harm our business and financial condition.

Biotechnology patents are numerous and may, at times, conflict with one another. As a result, it is not always clear to industry participants, including us, which patents cover the multitude of biotechnology product types. Ultimately, the courts must determine the scope of coverage afforded by a patent and the courts do not always arrive at uniform conclusions.

A patent owner may claim that we are making, using, selling or offering for sale an invention covered by the owner’s patents and may go to court to stop us from engaging in such activities. Such litigation is not uncommon in our industry.

Patent lawsuits can be expensive and would consume time and other resources. There is a risk that a court would decide that we are infringing a third party’s patents and would order us to stop the activities covered by the patents, including the commercialization of our products. In addition, there is a risk that we would have to pay the other party damages for having violated the other party’s patents (which damages may be increased, as well as attorneys’ fees ordered paid, if infringement is found to be willful), or that we will be required to obtain a license from the other party in order to continue to commercialize the affected products, or to design our products in a manner that does not infringe a valid patent. We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms or at all, requiring cessation of activities that were found to infringe a valid patent. We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

Moreover, certain components of ~~Afrezza~~our products may be manufactured outside the United States and imported into the United States. As such, third parties could file complaints under 19 U.S.C. Section 337(a)(1)(B) (a “337 action”) with the International Trade Commission (the “ITC”). A 337 action can be expensive and would consume time and other resources. There is a risk that the ITC would decide that we are infringing a third party’s patents and either enjoin us from importing the infringing products or parts thereof into the United States or set a bond in an amount that the ITC considers would offset our competitive advantage from the continued importation during the statutory review period. The bond could be up to 100% of the value of the patented products. We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms, or at all, resulting in a permanent injunction preventing any further importation of the infringing products or parts thereof into the United States. We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

Although we ~~own a number of domestic and foreign patents and patent applications relating to Afrezza, we have identified certain~~do not believe that our products or product candidates infringe any third-party patents, ~~having claims that may trigger an allegation~~if a plaintiff was to allege infringement of ~~infringement in connection with the commercial manufacture and sale of Afrezza. If a court were to determine that Afrezza was infringing any of these~~their patent rights, we would have to establish with the court that ~~these~~their patents are invalid or unenforceable in order to avoid legal liability for infringement of these patents. However, proving patent invalidity or unenforceability can be difficult because issued patents are presumed valid. Therefore, in the event that we are unable to prevail in a non-infringement or invalidity action we will have to either acquire the third-party patents outright or seek a royalty-bearing license. Royalty-bearing licenses effectively increase production costs and therefore may materially affect product profitability. Furthermore, should the patent holder refuse to either assign or license us the infringed patents, it may be necessary to cease manufacturing the product entirely and/or design around the patents, if possible. In either event, our business, financial condition and results of operations would be harmed and our profitability could be materially and adversely impacted.

or developments. If securities analysts or investors perceive these results to be negative, the market price of our common stock and other securities may decline.

In addition, patent litigation may divert the attention of key personnel and we may not have sufficient resources to bring these actions to a successful conclusion. At the same time, some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. An adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products or result in substantial monetary damages, which would adversely affect our business, financial condition and results of operations and cause the market price of our common stock and other securities to decline.

We have not selected trade names for some of our product candidates in our pipeline; therefore, we have not filed trademark registrations for such potential trade names for our product candidates, nor can we assure that we will be granted registration of any potential trade names for which we do file. No assurance can be given that any of our trademarks will be registered in the United States or elsewhere, or once registered that, prior to our being able to enter a particular market, they will not be cancelled for non-use. Nor can we give assurances, that the use of any of our trademarks will confer a competitive advantage in the marketplace.

Furthermore, even if we are successful in our trademark registrations, the FDA has its own process for drug nomenclature and its own views concerning appropriate proprietary names. It also has the power, even after granting market approval, to request a company to reconsider the name for a product because of evidence of confusion in the marketplace. We cannot assure you that the FDA or any other regulatory authority will approve of any of our trademarks or will not request reconsideration of one of our trademarks at some time in the future.

We may not be able to generate sufficient cash to service all of our indebtedness. We may be forced to take other actions to satisfy our obligations under our indebtedness or we may experience a financial failure.

Our ability to make scheduled payments on or to refinance our debt obligations will depend on our financial and operating performance, which is subject to the commercial success of Afrezza, the extent to which we are able to successfully develop and commercialize our Technosphere drug delivery platform and any other product candidates that we develop, prevailing economic and competitive conditions, and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our future debt agreements. In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or obtain sufficient proceeds from those dispositions to meet our debt service and other obligations when due.

Future sales of shares of our common stock in the public market, or the perception that such sales may occur, may depress our stock price and adversely impact the market price of our common stock and other securities. *

If our existing stockholders or their distributees sell substantial amounts of our common stock in the public market, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress the market price of our common stock and the market price of our other securities. Any such sales of our common stock in the public market may affect the price of our common stock or the market price of our other securities.

In the future, we may sell additional shares of our common stock to raise capital. In addition, a substantial number of shares of our common stock is reserved for: issuance upon the exercise of stock options, warrant exercises, and the vesting of restricted stock unit awards; the purchase of shares of common stock under our employee stock purchase program; and the issuance of shares upon exchange or conversion of the 2021 notes or any other convertible debt we may issue. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance or sale of substantial amounts of common stock, or the perception that such issuances or sales may occur, could adversely affect the market price of our common stock and other securities.

Our stock price is volatile and may affect the market price of our common stock and other securities.*volatile.

Between January 1, 2014 and September 30, 2017, our closing stock price as reported on The NASDAQ Global Market has ranged from $0.71 to $54.80, adjusted for the reverse stock split that occurred during this period; in unadjusted terms, the range over this period was $0.14 to $10.96. The trading price of our common stock has been and is likely to continue to be volatile. ~~The stock market, particularly in recent years, has experienced significant volatility particularly with respect to pharmaceutical and biotechnology stocks, and this trend may continue.~~

The volatility of pharmaceutical and biotechnology stocks often does not relate to the operating performance of the companies represented by the stock. Our business and the market price of our common stock may be influenced by a large variety of factors, including:

Any of these risks, as well as other factors, could cause the market value of our common stock and other securities to decline.

If we fail to continue to meet all applicable listing requirements, our common stock may be delisted from ~~The NASDAQ~~the Nasdaq Global Market, which could have an adverse impact on the liquidity and market price of our common stock.*

Our common stock is currently listed on The ~~NASDAQ~~Nasdaq Global Market, which has qualitative and quantitative listing criteria. If we are unable to meet any of the ~~NASDAQ~~Nasdaq listing requirements in the future, such as the corporate governance requirements, the minimum closing bid price requirement, or the minimum market value of listed securities requirement, ~~NASDAQ~~Nasdaq could determine to delist our common stock. A delisting of our common stock could adversely affect the market liquidity of our common stock, decrease the market price of our common stock, adversely affect our ability to obtain financing for the continuation of our operations and result in the loss of confidence in our company. On September 14, 2016, we received notice from the Listing Qualifications Department of the NASDAQ Stock Market indicating that, for the previous 30 consecutive business days, the bid price for our common stock closed below the minimum $1.00 per share required for continued inclusion on The NASDAQ Global Market. The notification letter stated that we would be afforded 180 calendar days, or until March 13, 2017, to regain compliance with the minimum bid price requirement. In order to regain compliance, on March 1, 2017, our board of directors and stockholders approved the Charter Amendment to effect the Reverse Stock Split. On March 3, 2017, our common stock began trading on The NASDAQ Global Market on a split-adjusted basis at a ratio of 1 share for 5. On March 16, 2017, we received a letter from the Nasdaq Stock Market indicating that we had regained compliance with the $1.00 minimum closing bid price requirement. Since effecting the Reverse Stock Split, the market price per share of our common stock has closed below $1.00 on multiple occasions. There can be no assurance that the market price per share of our common stock will remain in excess of the $1.00 minimum closing bid price requirement in the future.

~~If other biotechnology and biopharmaceutical companies or the securities markets in general encounter problems, the market price of our common stock and other securities could be adversely affected.~~

Public companies in general, including companies listed on The NASDAQ Global Market, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. There has been particular volatility in the market prices of securities of biotechnology and other life sciences companies, and the market prices of these companies have often fluctuated because of problems or successes in a given market segment or because investor interest has shifted to other segments. These broad market and industry factors may cause the market price of our common stock and other securities to decline, regardless of our operating performance. We have no control over this volatility and can only focus our efforts on our own operations, and even these may be affected due to the state of the capital markets.

In the past, following periods of large price declines in the public market price of a company’s securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which would hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.

The future sale of our common stock or the exchange or conversion of our 2021 notes into common stock could negatively affect the market price of our common stock and other securities.*

As of October 31, 2017, we had 117,147,107 shares of common stock outstanding. Substantially all of these shares are available for public sale, subject in some cases to volume and other limitations. If our common stockholders sell substantial amounts of common stock in the public market, or the market perceives that such sales may occur, the market price of our common stock and other securities may decline. Likewise the issuance of additional shares of our common stock upon the exchange or conversion of some or all of our 2021 notes, or 2019 notes, Tranche B notes, could adversely affect the market price of our common stock and other

securities. In addition, the existence of these notes may encourage short selling of our common stock by market participants, which could adversely affect the market price of our common stock and other securities.

In addition, we will need to raise substantial additional capital in the future to fund our operations. If we raise additional funds by issuing equity securities or additional convertible debt, the market price of our common stock and other securities may decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

We are incorporated in Delaware. Certain anti-takeover provisions under Delaware law and in our certificate of incorporation and amended and restated bylaws, as currently in effect, may make a change of control of our company more difficult, even if a change in control would be beneficial to our stockholders or the holders of our other securities. Our anti-takeover provisions include provisions such as a prohibition on stockholder actions by written consent, the authority of our board of directors to issue preferred stock without stockholder approval, and supermajority voting requirements for specified actions. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits stockholders owning 15% or more of our outstanding voting stock from merging or combining with us in certain circumstances. These provisions may delay or prevent an acquisition of us, even if the acquisition may be considered beneficial by some of our stockholders. In addition, they may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated bylaws provide that, to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

This provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act of 1933, as amended, or the Securities Act, creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated bylaws. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

Because we do not expect to pay dividends in the foreseeable future, you must rely on stock appreciation for any return on any investment in our common stock.

We have paid no cash dividends on any of our capital stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future, and payment of cash dividends, if any, will also depend on our financial condition, results of operations, capital requirements and other factors and will be at the discretion of our board of directors. ~~Pursuant~~In addition, pursuant to the ~~Facility Agreement,~~MidCap credit facility, we are subject to contractual restrictions on the payment of dividends. There is no guarantee that our common stock will appreciate or maintain its current price. You could lose the entire value of any investment in our common stock.

~~We have a limited number~~Future sales of unreserved shares available for future issuance, which may impair our ability to conduct future financing and other transactions.*

Our amended and restated certificate of incorporation, as amended, currently authorizes us to issue up to 140,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of October 24, 2017, we had a total of 4,094,204 shares of common stock that were authorized but unissued, and we have currently reserved a significant number of these shares for future issuance pursuant to outstanding equity awards, our equity plans and our 2019 notes, Tranche B notes, and interest payments under or upon conversion of the 2021 notes. As a result, our ability to issue shares of common stock other than pursuant to existing arrangements will be limited until such time, if ever, that we are able to amend our amended and restated certificate of incorporation to further increase our authorized shares of common stock or shares currently reserved for issuance otherwise become available (for example, due to the termination of the underlying agreement to issue the shares). As described in our preliminary proxy statement filed with the SEC on November 7, 2017, we are presenting a proposal for stockholder vote at a special meeting of stockholders to be held on December 13, 2017 to approve an amendment to our amended and restated certificate of incorporation to increase the authorized number of shares of common stock from 140,000,000 to 280,000,000 shares. There is no guarantee that this proposal will be approved by our stockholders.

~~If we are unable to enter into new arrangements to issue~~ shares of our common stock in the public market, or the perception that such sales may occur, may depress our stock price and adversely impact the market price of our common stock and other securities.*

We may need to raise substantial additional capital in the future to fund our operations. If we raise additional funds by issuing equity securities or additional convertible debt, the market price of our common stock and other securities may decline. Similarly, if our existing stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock and other securities could decrease. The perception in the public market that we or ~~exercisable into~~our existing stockholders might sell shares of common stock could also depress the market price of our common stock and the market price of our other securities.

Likewise, the issuance of additional shares of our common stock ~~our ability to complete equity-based financings~~upon the exchange or ~~other transactions that involve~~conversion of the ~~potential issuance~~Mann Group convertible note, or the Senior convertible notes, could adversely affect the market price of our common stock ~~or securities convertible or exercisable into our common stock, will be limited. In lieu~~and other securities. Moreover, the existence of ~~issuing common stock or securities convertible into our common stock in any future equity financing transactions, we~~these notes may ~~need to issue some or all of our authorized but unissued shares of preferred stock, which would likely have superior rights, preferences and privileges to those~~encourage short selling of our common stock ~~or we may need to issue debt that is not convertible into~~by market participants, which could adversely affect the market price of our common stock and other securities.

In addition, a substantial number of shares of our common stock ~~which may require us to grant security interests in~~is reserved for issuance upon the exercise of stock options, the vesting of restricted stock unit awards and purchases under our ~~assets and property and/~~employee stock purchase program. The issuance or ~~impose covenants upon us that restrict our business. If we are unable to issue additional shares~~sale of substantial amounts of common stock, or ~~securities convertible~~the perception that such issuances or ~~exercisable into~~sales may occur, could adversely affect the market price of our common stock and other securities.

If other biotechnology and biopharmaceutical companies or the securities markets in general encounter problems, the market price of our common stock and other securities could be adversely affected.

Public companies in general, including companies listed on The Nasdaq Stock Market, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. There has been particular volatility in the market prices of securities of biotechnology and other life sciences companies, and the market prices of these companies have often fluctuated because of problems or successes in a given market segment or because investor interest has shifted to other segments. These broad market and industry factors may cause the market price of our common stock and other securities to decline, regardless of our operating performance. We have no control over this volatility and can only focus our efforts on our own operations, and even these may be affected due to the state of the capital markets.

Unstable market, economic and geopolitical conditions may have serious adverse consequences on our business, financial condition and stock price.*

The global credit and financial markets have experienced extreme volatility and disruptions in the past. These disruptions can result in severely diminished liquidity and credit availability, increase in inflation, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, actual or anticipated bank failures, higher inflation, or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Our portfolio of corporate and government bonds could also be adversely impacted. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn or rising inflation, which could directly affect our ability to ~~enter into strategic transactions such as acquisitions of companies or technologies,~~attain our operating goals on schedule and on budget.

Other international and geopolitical events could also have a serious adverse impact on our business. For instance, in February 2022, Russia initiated military action against Ukraine. In response, the United States and certain other countries imposed significant sanctions and trade actions against Russia and could impose further sanctions, trade restrictions, and other retaliatory actions. While we cannot predict the broader consequences, the conflict and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may ~~also be limited. If we propose to amend our amended and restated certificate of incorporation to~~ increase our ~~authorized shares of common stock, such a proposal would require the approval by the holders of a majority of~~costs, disrupt our ~~outstanding shares of common stock, and we cannot assure you that such a proposal would be adopted. If we are unable~~supply chain, impair our ability to ~~complete financing, strategic~~raise or ~~other transactions due to~~access additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our ~~inability to issue additional shares of common stock or securities convertible or exercisable into our common stock, our~~business, financial condition, and ~~business prospects may be materially harmed.~~results of operations.

~~None.~~In April 2023, we elected to pay quarterly interest under the Mann Group convertible note of approximately $0.1 million by issuing the Mann Group 13,192 shares of common stock. See Note 9 – Borrowings.

We relied on an exemption from registration provided by Section 3(a)(9) or 4(a)(2) of the Securities Act of 1933, as amended, for the issuance of the shares described above.

During the three months ended June 30, 2023, one of our executive officers adopted a written trading plan for the orderly disposition of the Company’s securities as set forth in the table below:

~~ITEM 6. EXHIBITS~~

~~Exhibit~~

~~Number~~

~~Description~~

Type of ~~Document~~Trading Arrangement

Name and Position

Action

Date

Rule
10b5-1(1)

Non-Rule
10b5-1(2)

Total Shares of Common Stock to be Sold

Expiration Date

~~3.1~~Stuart A. Tross, EVP
Chief People and Workplace Officer

Adoption

May 24, 2023

—

384,020

May 24, 2024

_________________________

(1)

Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

(2)

"Non-Rule 10b5-1 trading arrangement" as defined in Item 408(c) of Regulation S-K under the Exchange Act.

ITEM 6.EXHIBITS


Exhibit Number		Description of Document

3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to MannKind’s Quarterly Report on Form 10-Q (File No. 000-50865), filed with the SEC on August 9, 2016).

3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation of MannKind Corporation (incorporated by reference to Exhibit 3.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on March 2, 2017).

3.3		Certificate of Amendment of Amended and Restated ~~Bylaws (incorporated by reference to MannKind’s Current Report on Form 8-K~~ ~~(File No. 000-50865), filed with the SEC on November 19, 2007).~~

~~4.1~~		~~Reference is made to Exhibits~~ ~~3.1~~, ~~3.2~~ ~~and~~ ~~3.3~~.

~~4.2~~		~~Form~~Certificate of ~~common stock certificate~~Incorporation of MannKind Corporation (incorporated by reference to Exhibit ~~4.2 to MannKind’s Annual Report on~~ ~~Form 10-K (File No. 000-50865), filed with the SEC on March 16, 2017).~~

~~4.3~~		~~Form of 9.75% Senior Secured Convertible Promissory Note due 2019 (incorporated by reference Exhibit 99.2~~3.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on ~~July 1, 2013)~~December 13, 2017).

~~4.4~~ 3.4		~~Form~~Certificate of Amendment of Amended and Restated ~~9.75% Senior Secured Convertible Promissory Note due 2019~~Certificate of Incorporation of MannKind Corporation (incorporated by reference to Exhibit ~~4.7~~3.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on May 27, 2020).

3.5		Certificate of Amendment of Amended and Restated Certificate of Incorporation of MannKind Corporation (incorporated by reference to Exhibit 3.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on May 30, 2023).

3.6		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on May 27, 2020).

4.1		Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6.

4.2		Form of common stock certificate (incorporated by reference to Exhibit 4.2 to MannKind’s Annual Report on Form 10-K (File No. 000-50865), filed with the SEC on March ~~3, 2014)~~16, 2017).

~~4.5~~ 4.3		~~Form of Tranche B Senior Secured Note due 2019 (incorporated by reference to Exhibit 4.8 to MannKind’s Quarterly Report on Form 10-Q (File No. 000-50856), filed with the SEC on May 12, 2014).~~

~~4.6~~		Milestone Rights Purchase Agreement, dated as of July 1, 2013, by and among MannKind, Deerfield Private Design Fund II, L.P. and Horizon Santé FLML SÁRL (incorporated by reference to Exhibit 99.3 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on July 1, 2013).

~~4.7~~ 4.4		~~Guaranty and Security Agreement, dated as~~Form of ~~July 1, 2013, by and among MannKind, MannKind LLC, Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P. and Horizon Santé FLML SÁRL (incorporated by reference~~Warrant to ~~Exhibit 99.4~~Purchase Stock issued to ~~MannKind’s Current Report~~MidCap Financial Trust on ~~Form 8-K (File No. 000-50865), filed with the SEC on July 1, 2013).~~

~~4.8~~		Facility Agreement, dated as of July 1, 2013, by and among MannKind Corporation, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (incorporated by reference to Exhibit 99.1 MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on July 1, 2013).

~~4.9~~		First Amendment to Facility Agreement and Registration Rights Agreement, dated as of February 28, 2014, by and among MannKind, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (incorporated by reference to Exhibit 10.39 to MannKind’s Annual Report on Form 10-K (File No. 000-50865), filed with the SEC on March 3, 2014).

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	13-3607736
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~30930 Russell Ranch Road, Suite 301~~1 Casper Street ~~Westlake Village, California~~Danbury, Connecticut	~~91362~~06810
(Address of principal executive offices)	(Zip Code)


Large accelerated filer	☐☒	Accelerated filer	☒☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

		Emerging growth company	☐


	Page
PART I: FINANCIAL INFORMATION	2

Item 1. Financial Statements (Unaudited)	2
~~Condensed Consolidated Balance Sheets: September 30, 2017 and December 31, 2016~~	2
Condensed Consolidated Statements of Operations: Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	32
Condensed Consolidated Statements of Comprehensive Loss: Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	43
Condensed Consolidated Balance Sheets: June 30, 2023 and December 31, 2022	4
Condensed Consolidated Statements of Stockholders’ Deficit: Three and six months ended June 30, 2023 and 2022	5
Condensed Consolidated Statements of Cash Flows: ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	56
Notes to Condensed Consolidated Financial Statements	67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2933
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3940
Item 4. Controls and Procedures	3940

PART II: OTHER INFORMATION	4042

Item 1. Legal Proceedings	4042
Item 1A. Risk Factors	4042
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6370
Item 3. Defaults Upon Senior Securities	6370
Item 4. Mine Safety Disclosures	6370
Item 5. Other Information	6370
Item 6. Exhibits	6372

SIGNATURES	74


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	(In thousands except per share data)
Revenues:
Net revenue – commercial product sales	$	18,345		$	12,722		$	35,907		$	22,548
Revenue – collaborations and services		11,211			5,868			22,597			8,034
Royalties – collaborations		19,055			304			30,733			304
Total revenues		48,611			18,894			89,237			30,886
Expenses:
Cost of goods sold		5,224			4,617			10,754			6,901
Cost of revenue – collaborations and services		9,013			8,298			19,696			17,012
Research and development		6,453			4,893			12,058			8,429
Selling		14,002			15,868			27,312			28,596
General and administrative		11,947			10,175			22,489			18,144
Loss (gain) on foreign currency transaction		251			(4,503	)		1,205			(6,486	)
Total expenses		46,890			39,348			93,514			72,596
Income (loss) from operations		1,721			(20,454	)		(4,277	)		(41,710	)
Other income (expense):
Interest income, net		1,547			516			2,849			893
Interest expense on financing liability		(2,449	)		(2,443	)		(4,873	)		(4,814	)
Interest expense		(6,873	)		(6,642	)		(9,659	)		(9,390	)
Gain on available-for-sale securities		932			—			932			—
Other expense		(143	)		—			(32	)		—
Total other expense		(6,986	)		(8,569	)		(10,783	)		(13,311	)
Loss before income tax expense		(5,265	)		(29,023	)		(15,060	)		(55,021	)
Benefit from income taxes		—			—			—			—
Net loss	$	(5,265	)	$	(29,023	)	$	(15,060	)	$	(55,021	)
Net loss per share – basic and diluted	$	(0.02	)	$	(0.11	)	$	(0.06	)	$	(0.22	)
Weighted average shares used to compute net loss per share – basic and diluted		265,626			253,644			264,802			252,775



	June 30, 2023			December 31, 2022
	(In thousands except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	86,184		$	69,767
Short-term investments		58,163			101,079
Accounts receivable, net		27,789			16,801
Inventory		25,290			21,772
Prepaid expenses and other current assets		32,807			25,477
Total current assets		230,233			234,896
Property and equipment, net		69,510			45,126
Goodwill		1,931			2,428
Other intangible asset		1,113			1,153
Long-term investments		2,282			1,961
Other assets		8,353			9,718
Total assets	$	313,422		$	295,282

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	17,127		$	11,052
Accrued expenses and other current liabilities		36,833			35,553
Financing liability – current		9,686			9,565
Midcap credit facility – current		16,667			—
Deferred revenue – current		3,489			1,733
Recognized loss on purchase commitments – current		13,164			9,393
Total current liabilities		96,966			67,296
Mann Group convertible note		8,829			8,829
Accrued interest – Mann Group convertible note		55			55
Financing liability – long term		94,395			94,512
Midcap credit facility – long term		22,811			39,264
Senior convertible notes		226,124			225,397
Recognized loss on purchase commitments – long term		56,063			62,916
Operating lease liability		4,646			5,343
Deferred revenue – long term		60,248			37,684
Milestone liabilities		3,772			4,524
Total liabilities		573,909			545,820
Commitments and contingencies (Note 15)
Stockholders' deficit:
Undesignated preferred stock, $0.01 par value – 10,000,000 shares authorized; no shares issued or outstanding as of June 30, 2023 and December 31, 2022		—			—
Common stock, $0.01 par value – 800,000,000 and 400,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively, and 268,235,145 and 263,793,305 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		2,682			2,638
Additional paid-in capital		2,968,917			2,964,293
Accumulated other comprehensive income		443			—
Accumulated deficit		(3,232,529	)		(3,217,469	)
Total stockholders' deficit		(260,487	)		(250,538	)
Total liabilities and stockholders' deficit	$	313,422		$	295,282

	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	20,092		$	22,895
Accounts receivable, net		1,804			302
Receivable from Sanofi		—			30,557
Inventory		3,129			2,331
Asset held for sale		—			16,730
Deferred costs from commercial product sales		543			309
Prepaid expenses and other current assets		3,061			4,364
Total current assets		28,629			77,488
Property and equipment - net		27,374			28,927
Other assets		480			648
Total assets	$	56,483		$	107,063

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	5,283		$	3,263
Accrued expenses and other current liabilities		12,492			7,937
Facility financing obligation		57,942			71,339
Deferred revenue - net		3,021			3,419
Deferred payments from collaboration - current		250			1,000
Recognized loss on purchase commitments - current		12,480			5,093
Total current liabilities		91,468			92,051
Note payable to principal stockholder		79,666			49,521
Accrued interest - note payable to principal stockholder		1,173			9,281
Senior convertible notes		27,657			27,635
Recognized loss on purchase commitments - long term		99,769			95,942
Deferred payments from collaboration - long term		563			—
Warrant liability		—			7,381
Milestone rights liability and other liabilities		7,202			8,845
Total liabilities		307,498			290,656
Commitments and contingencies (Note 11)
Stockholders' deficit:
Undesignated preferred stock, $0.01 par value - 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.01 par value - 140,000,000 shares authorized, 104,707,116 and 95,680,831 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		1,047			957
Additional paid-in capital		2,570,072			2,553,039
Accumulated other comprehensive loss		(20	)		(24	)
Accumulated deficit		(2,822,114	)		(2,737,565	)
Total stockholders' deficit		(251,015	)		(183,593	)
Total liabilities and stockholders' deficit	$	56,483		$	107,063

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Net revenue - commercial product sales	$	1,981		$	573		$	4,726		$	573
Net revenue - collaboration		62			161,781			187			161,781
Revenue - other		—			—			2,302			—
Total revenues		2,043			162,354			7,215			162,354
Expenses:
Cost of goods sold		4,575			4,394			12,210			12,912
Product costs - collaboration		—			22,742			—			22,742
Research and development		4,361			3,917			10,611			13,357
Selling, general and administrative		17,725			13,135			51,681			31,595
Property and equipment impairment		92			—			203			695
Loss on foreign currency translation		3,684			1,012			12,077			3,035
Gain on purchase commitment		(215	)		(1,075	)		(215	)		(1,075	)
Total expenses		30,222			44,125			86,567			83,261
(Loss) income from operations		(28,179	)		118,229			(79,352	)		79,093
Other income (expense):
Change in fair value of warrant liability		(1,289	)		13,185			5,488			7,879
Interest income		65			28			178			70
Interest expense on notes		(2,310	)		(4,166	)		(7,438	)		(12,567	)
Interest expense on note payable to principal stockholder		(1,173	)		(729	)		(2,608	)		(2,172	)
Loss on extinguishment of debt		—			—			(830	)		—
Other (expense) income		—			(27	)		13			(613	)
Total other (expense) income		(4,707	)		8,291			(5,197	)		(7,403	)
(Loss) income before benefit for income taxes		(32,886	)		126,520			(84,549	)		71,690
Income tax benefit		—			—			—			—
Net (loss) income	$	(32,886	)	$	126,520		$	(84,549	)	$	71,690
Net (loss) income per share - basic	$	(0.31	)	$	1.32		$	(0.84	)	$	0.79
Net (loss) income per share - diluted	$	(0.31	)	$	1.31		$	(0.84	)	$	0.79
Shares used to compute basic net (loss) income per share		104,703			95,627			100,136			90,838
Shares used to compute diluted net (loss) income per share		104,703			96,549			100,136			90,873


	Common Stock				Additional			Accumulated Other			Accumulated
	Shares		Amount		Paid-in Capital			Comprehensive Loss			Deficit			Total
	(In thousands)
BALANCE, JANUARY 1, 2022		251,478	$	2,515	$	2,918,205		$	—		$	(3,130,069	)	$	(209,349	)
Net issuance of common stock associated with stock options and restricted stock units		450		4		125			—			—			129
Issuance of common stock under the employee stock purchase plan		233		2		738			—			—			740
Stock-based compensation expense		—		—		2,806			—			—			2,806
Issuance of common stock from market price stock purchase plan		252		3		681			—			—			684
Cumulative loss on available-for-sale securities		—		—		—			(1,076	)		—			(1,076	)
Net loss		—		—		—			—			(25,998	)		(25,998	)
BALANCE, MARCH 31, 2022		252,413	$	2,524	$	2,922,555		$	(1,076	)	$	(3,156,067	)	$	(232,064	)
Issuance of common stock pursuant to conversion of Mann Group convertible note		3,838		39		9,557			—			—			9,596
Issuance of common stock pursuant to conversion of the Mann Group convertible note interest		193		2		518			—			—			520
Net issuance of common stock associated with stock options and restricted stock units		833		8		(385	)		—			—			(377	)
Stock-based compensation expense		—		—		4,422			—			—			4,422
Cumulative loss on available-for-sale securities		—		—		—			(130	)		—			(130	)
Net loss		—		—		—			—			(29,023	)		(29,023	)
BALANCE, JUNE 30, 2022		257,277	$	2,573	$	2,936,667		$	(1,206	)	$	(3,185,090	)	$	(247,056	)


	Six Months Ended June 30,
	2023			2022
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(15,060	)	$	(55,021	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		9,235			7,228
Interest expense on financing liability		4,873			4,814
Write-off of inventory		3,359			451
Depreciation and amortization		2,173			1,326
Loss (gain) on foreign currency transaction		1,205			(6,486	)
Amortization of debt discount and issuance costs		941			940
Amortization of right-of-use assets		657			2,331
Interest expense on Mann Group convertible note		109			202
Gain on available-for-sale securities		(932	)		—
Other, net		(245	)		469
Interest on milestone right		—			3,912
Changes in operating assets and liabilities:
Accounts receivable, net		(10,988	)		(10,036	)
Inventory		(6,877	)		(2,720	)
Prepaid expenses and other current assets		(5,231	)		(235	)
Other assets		(20	)		(441	)
Accounts payable		6,075			867
Accrued expenses and other current liabilities		(4,403	)		(134	)
Deferred revenue		24,320			11,059
Recognized loss on purchase commitments		(4,286	)		(2,928	)
Operating lease liabilities		(1,153	)		(2,441	)
Deposits from customer		—			(3,387	)
Net cash provided by (used in) operating activities		3,752			(50,230	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of debt securities		69,083			53,307
Purchase of held-to-maturity debt securities		(26,447	)		(68,470	)
Purchase of property and equipment		(25,180	)		(2,222	)
Acquisition of V-Go		—			(15,099	)
Purchase of available-for-sale securities		—			(5,000	)
Net cash provided by (used in) investing activities		17,456			(37,484	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from at-the-market-offering		2,782			—
Issuance costs associated with at-the-market offering		(41	)		—
Proceeds from market price stock purchase plan and employee stock purchase plan		1,075			684
Payments for taxes related to net issuance of common stock associated with restricted stock units and stock options		(8,492	)		(248	)
Payment on financing liability		(115	)		(1,399	)
Net cash used in financing activities		(4,791	)		(963	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		16,417			(88,677	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		69,767			124,184
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	86,184		$	35,507

	2016 as
	Previously					2016 as
(In thousands)	Presented		Adjustments			Adjusted
Common stock	$	4,784	$	(3,827	)	$	957
Additional paid-in capital	$	2,549,212	$	3,827		$	2,553,039

	September 30, 2017			December 31, 2016
Facility Financing Obligation (2019 Notes)
Principal amount	$	60,000		$	75,000
Unamortized debt discount		(2,058	)		(3,661	)
Net carrying amount	$	57,942		$	71,339
Senior Convertible Notes (2018 notes)
Principal amount	$	27,690		$	27,690
Unamortized premium		244			426
Unaccreted debt issuance costs		(277	)		(481	)
Net carrying amount	$	27,657		$	27,635
Note payable to principal stockholder - net carrying amount	$	79,666		$	49,521

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Accretion expense - debt issuance cost	$	7	$	9	$	39	$	26
Accretion expense - debt discount	$	431	$	428	$	1,564	$	1,280

	As of September 30, 2017
			Fair Value Measurements Using
	Carrying Value				(Level 1)		(Level 2)		(Level 3)		Fair Value
Financial liabilities:
Senior convertible notes	$	27.7		$		—	$	—	$	24.7	$	24.7
Facility financing obligation		57.9				—		—		60.0		60.0
Milestone rights		8.9				—		—		18.7		18.7
Total financial liabilities	$	94.5		$		—	$	—	$	103.4	$	103.4

		As of December 31, 2016
				Fair Value Measurements Using
		Carrying Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
Financial liabilities:
Senior convertible notes		$	27.6	$	—	$	—	$	22.9	$	22.9
Facility financing obligation			71.3		—		—		74.5		74.5
Milestone rights			8.9		—		—		18.4		18.4
Warrant liability (at recurring fair value)			7.4		—		—		7.4		7.4
Total financial liabilities	��	$	115.2	$	—	$	—	$	123.2	$	123.2

Balance at beginning of period December 31, 2016	$	7.4
Additions		—
Changes in fair value		(5.5	)
Settlement through exchange for common shares		(1.9	)
Payments		—
Fair value, end of period September 30, 2017	$	0.0

~~2017~~	€	~~2.7 million~~
~~2018~~	€	~~8.9 million~~
~~2019~~	€	~~11.6 million~~
~~2020~~	€	~~15.5 million~~
~~2021~~	€	~~15.5 million~~
~~2022~~	€	~~19.4 million~~
~~2023~~	€	~~19.4 million~~

2017	$	41,000
2018		457,000
2019		512,000
2020		528,000
2021		544,000
Thereafter		560,000
	$	2,642,000

	2016			2015
Description	Restructuring			Restructuring			Total
Accrual - January 1, 2017	$	209		$	1,167		$	1,376
Costs paid or settled		(209	)		(805	)		(1,014	)
Accrual - September 30, 2017	$	—		$	362		$	362

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017			2016		2017			2016
Basic EPS:
Net income (loss) (numerator)	$	(32,886	)	$	126,520	$	(84,549	)	$	71,690
Weighted average common shares (denominator)		104,703			95,627		100,136			90,838
Net income (loss) per share	$	(0.31	)	$	1.32	$	(0.84	)	$	0.79

Diluted EPS:
Net income (loss) (numerator)	$	(32,886	)	$	126,520	$	(84,549	)	$	71,690
Weighted average common shares		104,703			95,627		100,136			90,838

Effect of dilutive securities - common shares issuable		—			921		—			36
Adjusted weighted average common shares (denominator)		104,703			96,549		100,136			90,873

Net income (loss) per share	$	(0.31	)	$	1.31	$	(0.84	)	$	0.79

~~Exhibit~~ ~~Number~~		~~Description of Document~~
~~4.10~~		~~Second Amendment to Facility Agreement and Registration Rights Agreement, dated as of~~ August ~~11, 2014, by and~~ among MannKind, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (incorporated by reference to Exhibit 4.14 to MannKind’s Quarterly Report on Form 10-Q (File No. 000-50865), filed with the SEC on November 10, 2014).

~~4.11~~		Exchange and Third Amendment to Facility Agreement, dated June 29, 2017 by and among MannKind, MannKind LLC, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (incorporated by reference to Exhibit 99.2 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on June 29, 2017).

~~4.12~~		Fourth Amendment to Facility Agreement, dated October 23, 2017 by and among MannKind, MannKind LLC, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (incorporated by reference to Exhibit 99.2 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on October 23, 2017).

~~4.13~~		~~Indenture, by and between MannKind and U.S. Bank (dated October 30, 2017~~6, 2019 (incorporated by reference to Exhibit 4.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on ~~October 30, 2017)~~August 7, 2019).

~~4.14~~ 4.5		~~Form~~Convertible Promissory Note made by MannKind Corporation in favor of ~~5.75% Convertible Senior Subordinated Exchange Note due 2021~~The Mann Group LLC, dated August 6, 2019 (incorporated by reference to Exhibit ~~A of Exhibit 4.1~~4.6 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on ~~October 30, 2017)~~August 7, 2019).

~~4.15~~ 4.6		~~Form of Warrant~~Amendment No. 1 to ~~Purchase Common Stock issued November 16, 2015 (incorporated by reference to Exhibit 4.17 to MannKind’s Annual Report on Form 10-K (File No. 000-50865), filed with the SEC on March 15, 2016).~~


10.1*		~~Offer Letter Agreement,~~Convertible Promissory Note, dated ~~July 12, 2017,~~April 22, 2021, by and between MannKind Corporation and ~~Steven Binder (incorporated by reference to Exhibit 99.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on July 17, 2017).~~

~~10.2~~		~~Form of Exchange Agreement (incorporated by reference to Exhibit 99.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on October 2, 2017).~~

~~10.3~~		Form of Securities Purchase Agreement, dated October 10, 2017 (incorporated by reference to Exhibit 99.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on October 11, 2017).

~~10.4~~		~~Engagement Letter, dated October 10, 2017, by and between MannKind and H.C. Wainwright & Co.~~The Mann Group LLC (incorporated by reference to Exhibit 99.2 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on ~~October 11, 2017)~~April 26, 2021).

~~31.1~~ 4.7		Promissory Note made by MannKind Corporation in favor of The Mann Group LLC, dated August 6, 2019 (incorporated by reference to Exhibit 4.7 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on August 7, 2019).

4.8		Indenture, dated as of March 4, 2021, by and between MannKind Corporation and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on March 5, 2021).

4.9		Form of Global Note, representing MannKind Corporation’s 2.50% Convertible Senior Notes due 2026 (included as Exhibit A to the Indenture filed as Exhibit 4.15) (incorporated by reference to Exhibit 4.2 to MannKind’s Current Report on Form 8-K (File No. 000-50865), filed with the SEC on March 5, 2021).

10.1		MannKind Corporation 2018 Equity Incentive Plan, as amended.

10.2		MannKind Corporation 2004 Employee Stock Purchase Plan, as amended.

31.1		Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.


Exhibit Number		Description of Document

32.1		Certification of the Chief Executive Officer pursuant to Rules 13a-14(b) and 15d-14(b) of the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).

32.2		Certification of the Chief Financial Officer pursuant to Rules 13a-14(b) and 15d-14(b) of the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).

101		Inline Interactive Data Files pursuant to Rule 405 of Regulation S-T.

104		The cover page has been formatted in Inline XBRL.


Dated: ~~November~~August 7, ~~2017~~2023	MANNKIND CORPORATION

	By:	/s/ MICHAEL E. CASTAGNA
		Michael E. Castagna
		Chief Executive Officer (on behalf of the registrant and as the registrant’s Principal Executive Officer)

	By:	/s/ STEVEN B. BINDER
		Steven B. Binder
		Chief Financial Officer (~~on behalf of the registrant and as the registrant’s~~ Principal Financial and Accounting Officer)