MNKD 2017 Annual Report

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk Due to the fixed interest rates of our debt, we currently do not have an exposure to changes in our interest expense as a result of changes in interest rates. See Note 6 – Related Party Arrangements, Note 7- Borrowings, and Note 20 – Subsequent Events in the Notes to Consolidated Financial Statements included in Part II, Item 8 — Financial Statements and Supplementary Data for information about the principal amount of outstanding debt. The interest rate on amounts borrowed under The Mann Group Loan Arrangement is fixed at 5.84%.. As of December 31, 2017, we also had 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%. 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 change in interest rates equal to 10% of the interest rates on December 31, 2017 were to have occurred, this change would not have had a material effect on the value of our short-term investment portfolio. Foreign Currency Exchange Risk We incur and will continue to incur significant expenditures for insulin supply obligations under our supply agreement with Amphastar. Such obligations are denominated in Euros. At the end of each reporting period, the recognized 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 foreign currency hedging transactions to mitigate our exposure to foreign currency exchange risks, but may enter into foreign currency hedging transactions in the future. 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 exchange rate equal to 10% of the U.S. dollar to Euro exchange rate on December 31, 2017 were to occur, this change would have resulted in a foreign currency impact to our pre-tax income (losses) of approximately $10.8 million. Item 8. Financial Statements and Supplementary Data The information required by this Item is included in Items 15(a)(1) and (2) of Part IV of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. 64