MNKD 2017 Annual Report

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 and the Facility Financing Obligation, or if we fail to repay or repurchase the 2021 notes, Facility Financing Obligation, or borrowings under The Mann Group Loan Arrangement, 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 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 Milestone Rights to 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 of an Afrezza product and the 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, except for the months of August, September, October and December 2017. In these months the requirement was reduced to $10.0 million as of the last day of each month if certain conditions were met. We met the required conditions as of the last day of each of these periods. See Note 14 — Commitments and Contingencies and Note 7 — Borrowings for further information related to the Facility Agreement. On July 31, 2014, we entered into the Insulin Supply Agreement, pursuant to which we agreed to purchase certain annual minimum quantities of insulin. See Note 14 — 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 payments 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 8 — Collaboration Arrangements for further information related to the Sanofi agreements. These factors raise substantial doubt about our ability to continue as a going concern. Our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K, do not include adjustments that might result from the outcome of this uncertainty. Net cash used in operating activities, which consists of net loss adjusted for the various non-cash items, changes in working capital and changes in other balance sheet accounts, totaled $64.8 million for the year ended December 31, 2017. Net cash used in operating activities totaled $78.1 million and $57.2 million for the year ended December 31, 2016 and December 31, 2015, respectively. During the year ended December 31, 2017, we used $64.8 million of cash for our operating activities as a result of our net loss of $117.3 million, offset by a net decrease in operating assets and liabilities of $27.6 million and non-cash charges of $25.0 million. The decrease 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. The other changes in operating assets and liabilities was a result of increases in accounts payable of $3.8 million and accrued expenses 60