MNKD 2017 Annual Report

Receptor in 2016, which was offset against expense. These decreases were partially offset by an increase in FDA fees for the 2016 filing of a supplemental new drug application of $1.0 million and a $0.9 million reduction in our research and development tax credit as a result of lower qualifying expenses coupled with a transition to commercial sales activity. The increase in selling and marketing expenses of $18.3 million for the year ended December 31, 2016 compared to the prior year is due to an increase in costs for the support of sales and marketing of Afrezza as a result of our assuming responsibility for these activities which were previously the responsibility of Sanofi. Included in these costs are salaries of $2.9 million, contracted sales force and diabetic educators of $7.6 million, travel of $0.4 million, and consultants and related expenses for sales and marketing of $7.4 million. The decrease in general and administrative expenses of $12.3 million for the year ended December 31, 2016 compared to the prior year is primarily due to a decrease in costs associated with the 2015 reduction in force of $6.4 million; stock-based compensation expense of $2.6 million due to lower stock price and fewer employees; professional fees of $1.7 million due to lower internal communications, information technology, legal and outside service expenses due to concerted efforts to conserve cash; and facility spending of $1.7 million due to a lower operating cost as a result of the reduction in sales force and move to the leased Valencia offices, which helped save on facility costs. Property and equipment impairment decreased $139.2 million for the year ended December 31, 2016 compared to the year ended December 31, 2015. In the fourth quarter of 2015 and the first quarter of 2016, factors indicated the existence of impairment in connection with the lower than expected sales of Afrezza and the Sanofi termination. The property and equipment impairment in 2015 and the first quarter of 2016 reduced the carrying amount of our real property and machinery and equipment to fair value based on our impairment assessments. In the fourth quarter of 2016 we recorded a $0.5 million impairment charge associated with the Valencia property when it became probable that the property would be sold within one year. Under the Insulin Supply Agreement with Amphastar, payment obligations are denominated in Euros. We were required to record the foreign currency translation impact of the U.S. dollar to Euro exchange rate associated with the recognized loss on purchase commitments in 2016. We were also required to record the foreign currency translation impact of the U.S. dollar to Euro exchange rate associated with the deposit we made with Amphastar on this agreement in 2015. The gain on foreign currency translation for the year ended December 31, 2016 was $3.4 million as compared to a loss in 2015 of $2.7 million, resulting in a $6.1 million net variance. The (gain) loss on purchase commitments changed by $68.4 million as a result of a gain recorded in 2016 compared to a loss in 2015. The $2.3 million gain on purchase commitments in 2016, related to a renegotiation of certain of our purchase commitments (primarily the reduction in cancellation fees under the Insulin Supply Agreement). The $66.2 million loss on purchase commitments in 2015 resulted from our assessment of excess inventory as a result of lower than expected sales of Afrezza as well as a lower of cost or net realizable value adjustment due to estimated conversion costs in excess of our estimated selling price of Afrezza. 57