MNKD 2017 Annual Report

The annual purchase requirements under the contract are as follows: 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 8.9 million 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 11.6 million 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 15.5 million 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 15.5 million 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 19.4 million 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . € 19.4 million The Company took delivery of the required amount of insulin under the contract in 2017 but was only obligated to pay for half prior to December 31, 2017. Accordingly, approximately $1.6 million is included in accounts payable at December 31, 2017 related to the 2017 purchase requirement. The Company also paid cancellation fees of $1.4 million in 2017, which were previously included in the recognized loss on purchase commitments. Unless terminated earlier, the term of the Insulin Supply Agreement with Amphastar expires on December 31, 2023 and can be renewed for additional, successive two year terms upon 12 months’ written notice given prior to the end of the initial term or any additional two year term. The Company and Amphastar each have normal and customary termination rights, including termination for 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 December 31, 2017, the Company has other firm commitments with suppliers for an aggregate of $0.4 million. Office Lease — On May 5, 2017, the Company executed an office lease with Russell Ranch Road II LLC for the Company’s 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 October 2017 through February 2018. The lease expires January 2023 and provides the Company with a five year renewal option. On November 29, 2017, the Company executed an office lease with Russell Ranch Road II LLC to expand the office space for the Company’s corporate headquarters in Westlake Village, California. The office lease will commence in October 2018. The lease requires monthly payments of $35,969, increased by 3% annually, plus the estimated cost of maintaining the property by the landlord. In addition, the Company will be entitled to reimbursement from the landlord of up to $56,325 for tenant improvements. The lease expires January 2023 and provides the Company with a five year renewal option. Rent expense under all operating leases including office space and equipment was approximately $0.4 million for the year ended December 31, 2017, 2016 and 2015, respectively. 116