MNKD 2017 Annual Report

4. Property and Equipment Property and equipment consist of the following (in thousands): Estimated Useful Life(Years) December 31, 2017 2016 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 875 $ 875 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39-40 17,389 17,389 Building improvements . . . . . . . . . . . . . . . . . . . 5-40 34,957 34,957 Machinery and equipment . . . . . . . . . . . . . . . . . 3-15 62,681 62,992 Furniture, fixtures and office equipment . . . . . . 5-10 3,556 3,556 Computer equipment and software . . . . . . . . . . . 3 8,416 8,531 Construction in progress . . . . . . . . . . . . . . . . . . . — — 202 127,874 128,502 Less accumulated depreciation . . . . . . . . . . . . . . (100,952) (99,575) Total property and equipment, net . . . . . . . . . . . $ 26,922 $ 28,927 Depreciation and amortization expense related to property and equipment for the years ended December 31, 2017, 2016 and 2015, was $1.8 million, $2.4 million and $11.0 million, respectively. In 2015, in connection with the Company’s quarterly assessment of impairment indicators, the Company evaluated the continued lower than expected sales of Afrezza as reported by Sanofi throughout the fourth quarter of 2015, revised forecasts for sales of Afrezza provided by Sanofi in the fourth quarter of 2015 and level of commercial production in the fourth quarter of 2015, as well as the uncertainty associated with Sanofi’s announcement during the fourth quarter of their intent to reorganize their diabetes business. These factors indicated potentially significant changes in the timing and extent of cash flows, and the Company therefore determined that an impairment indicator existed in the fourth quarter of 2015. Based on the evaluation performed it was determined that the probability weighted undiscounted cash flows were not sufficient to recover the carrying value of the Danbury manufacturing facility. As a result of this assessment, the Company recorded, as of December 31, 2015, an impairment charge of $138.6 million for the Danbury manufacturing facility. An impairment of $0.7 million was charged to the individual asset groups for the year ended December 31, 2016, which is included in property and equipment impairment in the accompanying consolidated statements of operations, additionally with a $0.6 million impairment charge related to assets held for sale. On January 6, 2017, the Company and Rexford Industrial Realty, L.P. (“Rexford”) entered into an Agreement of Purchase and Sale and Joint Escrow Instructions (the “Purchase Agreement”), pursuant to which the Company agreed to sell and Rexford agreed to purchase certain parcels of real estate owned by the Company in Valencia, California and certain related improvements, personal property, equipment, supplies and fixtures (collectively, the “Property”) for $17.3 million. This asset in the amount of $16.7 million was classified as held for sale as of December 31, 2016. The sale and purchase of the Property for $17.3 million pursuant to the terms of the Purchase Agreement, as amended, was completed on February 17, 2017. Net proceeds were $16.7 million after deducting broker’s commission and other fees of approximately $0.6 million paid by the Company. Net proceeds received approximated the carrying value of the asset held for sale. 97