Business — MannKind Corporation and its subsidiaries (the “Company”) is a biopharmaceutical company focused on the development and commercialization of inhaled therapeutic products for diseases such as diabetes and pulmonary arterial hypertension. The Company’s only approved product, Afrezza (insulin human) Inhalation Powder, is an ultra rapid-acting inhaled insulin that was approved by the U.S. Food and Drug Administration (the “FDA”) in June 2014 to improve glycemic control in adults with diabetes. Afrezza became available by prescription in United States retail pharmacies in February 2015. Currently, the Company promotes Afrezza to endocrinologists and certain high-prescribing primary care physicians in the United States through its specialty sales force. In addition, the Company’s partner in Brazil, Biomm, commenced commercialization of Afrezza in January 2020 and the Company’s partners in India and Australia are preparing for regulatory submissions and have not yet commenced commercialization in their respective territories.

Basis of Presentation — The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is not currently profitable and has rarely generated positive net cash flow from operations. In addition, the Company expects to continue to incur significant expenditures for the foreseeable future in support of its manufacturing operations, sales and marketing costs for Afrezza, and development costs for product candidates in the Company’s pipeline. As of December 31, 2019, the Company had an accumulated deficit of $3.0 billion and $120.3 million of total principal amount of outstanding borrowings, with limited capital resources of $29.9 million in cash and cash equivalents and $20.0 million in short-term investments. These financial conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In August 2019, the Company and MannKind LLC entered into a credit and security agreement with MidCap Financial Trust (as amended, the “MidCap Credit Facility”) to recapitalize its debt structure (the “recapitalization”) (Refer to Note 7 – Borrowings for further details). The MidCap Credit Facility provides a secured term loan facility in an aggregate principal amount of up to $75.0 million, of which $40.0 million was outstanding as of December 31, 2019 and the remaining $35.0 million will become available under the following conditions: (1) $10.0 million will be available to the Company until April 15, 2020, subject to the satisfaction of certain conditions, including achieving Afrezza net revenue of at least $30.0 million on a trailing twelve month basis, and (2) the remaining $25.0 million will be available to the Company until June 30, 2021, subject to the satisfaction of certain milestone conditions associated with Afrezza net revenue and certain milestone conditions related to the Company’s collaboration with United Therapeutics (see Note 8 – Collaborations and Licensing Arrangements).

Principal payments on the MidCap Credit Facility began in September 2021. In addition, the MidCap Credit Facility contains certain covenants, one of which includes a requirement to maintain a minimum of $15.0 million of unrestricted cash and cash equivalents. This amount will increase to $20.0 million if the Company draws the aforementioned additional funding that may be made available.

As part of the recapitalization, the Company converted shares of common stock, made repayments on outstanding borrowings, and used some of the proceeds from the MidCap Credit Facility proceeds to:

Fully repay the remaining $5.0 million due on its financing facility with Deerfield Private Design Fund II L.P. and Deerfield Private Design International I L.P.

Pay down the Company’s obligations under the Mann Group promissory notes, including accrued interest, by $11.0 million and restructure the remaining $70.1 million of debt into the $35.0 million note that is convertible into shares of the Company’s common stock at $2.50 per share (the “Mann Group convertible note”) and the $35.1 million non-convertible note (the “Mann Group non-convertible note”).

Reduce the 5.75% Convertible Senior Subordinated Exchange Notes due 2021 (the “2021 notes”) by $8.5 million and restructure the remaining $10.2 million to the $2.6 million due June 2020 (the “June 2020 note”), $2.6 million due December 2020 (the “December 2020 note”, and together with the June 2020 note, the “2020 notes”), and the $5.0 million 5.75% Convertible Senior Subordinated Exchange Notes due November 2024 (the “2024 convertible notes”) which are convertible into shares of our common stock at $3.00 per share.

The Company’s capital resources may not be sufficient to continue to meet its current and anticipated obligations over the next twelve months if the Company cannot increase its operating cash inflows by growing its prescription and revenue base and/or obtain access to the remaining $35.0 million borrowings that may become available under its MidCap Credit Facility. In the event these capital resources are not sufficient, the Company may need to raise additional capital by selling equity or debt securities, entering into strategic business collaboration agreements with other companies, seeking other funding facilities or licensing arrangements, selling assets or by other means. However, the Company cannot provide assurances that additional capital will be available on acceptable terms or at all.

If the Company is unable to meet its current and anticipated obligations over the next twelve months through its existing capital resources, or obtain new sources of capital when needed, the Company may have to delay, reduce the scope of its manufacturing operations, reduce or eliminate one or more of its development programs, and/or make significant changes to its operating plan. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported Consolidated Balance Sheets or Statements of Operations. An adjustment has been made to the Consolidated Statements of Cash Flows for the fiscal year ended December 31, 2018 to separately identify the disclosures of non-cash investing and financing activities related to the payment of facility obligation through common stock issuance and senior convertible notes through common stock issuance. This change in classification does not affect previously reported cash flows from operating, investing or financing activities. In addition, an adjustment has been made to reclassify certain immaterial amounts of professional fees to other accrued expenses within the table of accrued expenses in Note 5 — Accrued Expenses and Other Current Liabilities as of December 31, 2018 for consistency with the current year presentation.

Segment Information — Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one segment operating in the United States of America.