MNKD 2017 Annual Report

Other Income (Expense) The following table provides a comparison of the other income (expense) categories for the years ended December 31, 2016 and 2015 (dollars in thousands): Year Ended December 31, 2016 2015 $ Change % Change Change in fair value of warrant liability . . . . . . . . . . . . . . . . . . . . . . $ 5,369 $ — $ 5,369 100% Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 18 67 372% Interest expense on notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,576) (21,231) 5,655 (27%) Interest expense on note payable to principal stockholder . . . . . . . . (2,901) (2,894) (7) 0% Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,024 (1,049) 73,073 (6,966%) Other (expense) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (597) 1,366 (1,963) (144%) Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,404 $(23,790) $82,194 (345%) During the year ended December 31, 2016 we recorded a $5.4 million change in the fair value of the warrant liability from May 12, 2016, the date that certain warrants were issued in connection with a registered public offering. There was no warrant liability for the year ended December 31, 2015. The decrease of $5.7 million in the interest expense on notes for the year ended December 31, 2016 compared to the prior year was primarily due to interest expense paid in 2015 for the achievement and re-measurement of the second milestone under the Milestone Agreement. There was no such payment in 2016. The $72.0 million gain from extinguishment of debt in 2016 was a result of the Settlement Agreement with Sanofi and forgiveness of the full outstanding loan balance of the Sanofi Loan Facility. The $1.0 million loss in 2015 was from extinguishment of debt driven by the settlement of the 5.75% Senior Convertible Notes due 2015 through payment of cash and issuance of new debt. The change in other (expense) income of $2.0 million for the year ended December 31, 2016 compared to the prior year was primarily due to a one-time adjustment in 2015 for patents we sold to a third party. Liquidity and Capital Resources To date, we have funded our operations through the sale of equity securities and convertible debt securities, borrowings under The Mann Group Loan Arrangement, under which we can no longer borrow as we have used all amounts available for borrowing, borrowings under the Facility Agreement with Deerfield, receipt of upfront, and milestone payments under the Sanofi License Agreement, and borrowings under the Sanofi Loan Facility which terminated in 2016. As of December 31, 2017, we had $157.8 million principal amount of outstanding debt, consisting of: • $23.7 million principal amount of 2021 notes bearing interest at 5.75% per annum and maturing on October 23, 2021; • The following amounts under the Facility Financing Obligation with Deerfield which are partially convertible as further described below: • $39.4 million principal amount of 2019 notes bearing interest at 9.75% per annum. Interest is payable in cash quarterly in arrears on the last business day of March, June, September and December of each year. $4.4 million principal amount was scheduled to become due on January 19, 2018, $15.0 million will become due and payable on each of July 2018 and July 2019, and $5.0 million will become due and payable in December 2019; 58