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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2020
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies | 13. Commitments and Contingencies Guarantees and Indemnifications — In the ordinary course of its business, the Company makes certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. The Company has not recorded any liability for these indemnities in the accompanying consolidated balance sheets. However, the Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount can be reasonably estimated. No such losses have been recorded to date. Litigation — The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. As of December 31, 2020, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company and no accrual has been recorded. The Company maintains liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and normal business operations. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company’s policy is to accrue for legal expenses in connection with legal proceedings and claims as they are incurred. Following the public announcement in January 2016 of the election by sanofi-aventis U.S. LLC (“Sanofi”) to terminate a license and collaboration agreement (the “Sanofi License Agreement”) between the Company and Sanofi and the subsequent decline in the Company’s stock price, two motions were submitted to the district court at Tel Aviv, Economic Department for the certification of a class action against the Company and certain of its officers and directors. In general, the complaints allege that the Company and certain of its officers and directors violated Israeli and U.S. securities laws by making materially false and misleading statements regarding the prospects for Afrezza, thereby artificially inflating the price of its common stock. The plaintiffs are seeking monetary damages. In November 2016, the district court dismissed one of the actions without prejudice. In the remaining action, the district court ruled in October 2017 that U.S. law will apply to this case. The plaintiff appealed this ruling, and following an oral hearing before the Supreme Court of Israel, decided to withdraw his appeal. Subsequently, in November 2018, the Company filed a motion to dismiss the certification motion. In September 2019, the plaintiff brought a motion to amend his claim, which the court denied in January 2020. The plaintiff has appealed this denial to the Supreme Court of Israel. The Company will continue to vigorously defend against the claims advanced. Contingencies — In July 2013, the Company entered into an agreement with the Milestone Purchasers, pursuant to which the Company granted the Milestone Rights to receive payments up to $90.0 million upon the occurrence of specified strategic and sales milestones, $70.0 million of which remains payable upon achievement of such milestones (see Note 7 — Borrowings). The fair value of the Milestone Rights is recorded in the consolidated balance sheet, including $1.3 million in accrued expenses and other current liabilities and $5.9 million in milestone rights and other liabilities. Commitments — In July 2014, the Company entered into the Insulin Supply Agreement with Amphastar pursuant to which Amphastar manufactures for and supplies to the Company certain quantities of recombinant human insulin for use in Afrezza. Under the terms of the Insulin Supply Agreement, Amphastar is responsible for manufacturing the insulin in accordance with the Company’s specifications and agreed-upon quality standards. In August 2019, the Company and Amphastar amended the Insulin Supply Agreement to extend the term to 2026 and to restructure the annual purchase commitments. As of December 31, 2020, the remaining purchase requirements are as follows:
|  | Minimum Commitment
2021 |  | € | 9.1 million
2022 |  | € | 8.5 million
2023 |  | € | 10.9 million
2024 |  | € | 14.6 million
2025 |  | € | 15.5 million
2026 |  | € | 19.4 million
During the year ended December 31, 2019, the Company paid amendment fees of $2.8 million which were recognized as cost of goods sold. There were no amendment fees paid in 2020. Unless terminated earlier, the term of the Insulin Supply Agreement expires on December 31, 2026 and can be renewed for additional, successive two year terms upon 12 months’ written notice given prior to the end of the initial term or any additional two year term. The Company and Amphastar each have normal and customary termination rights, including termination for a material breach that is not cured within a specific time frame or in the event of liquidation, bankruptcy or insolvency of the other party. In addition, the Company may terminate the Insulin Supply Agreement upon two years’ prior written notice to Amphastar without cause or upon 30 days’ prior written notice to Amphastar if a controlling regulatory authority withdraws approval for Afrezza, provided, however, in the event of a termination pursuant to either of the latter two scenarios, the provisions of the Insulin Supply Agreement require the Company to pay the full amount of all unpaid purchase commitments due over the initial term within 60 calendar days of the effective date of such termination. In 2019, the Company entered into two 90-day foreign currency hedging transactions to mitigate its exposure to foreign currency exchange risks associated with then-existing insulin purchase commitments. The Company realized a de minimis currency loss for these transactions, which was recorded in other income and expense. Warrants - In December 2018, the Company entered into an underwriting agreement with Leerink Partners LLC relating to the issuance and sale in a public offering of 26,666,667 shares of the Company’s common stock and warrants to purchase up to an aggregate of 26,666,667 shares of the Company’s common stock (the “December warrants”) at a combined purchase price of $1.50 per share and accompanying warrant. The shares of common stock and the December warrants were immediately separable. The December warrants were immediately exercisable at issuance at a price of $1.60 per share and had an expiry date of December 26, 2019. On December 26, 2019, 11,583,333 December warrants expired unexercised and 7,250,000 remained available for purchase at a price of $1.60 per share, which were subsequently exercised in June 2020. On August 6, 2019, in connection with the MidCap Credit Facility, the Company issued warrants to purchase an aggregate of 1,171,614 shares of the Company’s common stock, at an exercise price equal to $1.11 per share, to the lenders. On November 30, 2020, in connection with the third amendment to the MidCap Credit Facility, the Company issued warrants to purchase an aggregate of 111,853 shares of the Company’s common stock, at an exercise price of $2.91 per share. Vehicle Leases – During the second quarter of 2018, the Company entered into a lease agreement with Enterprise Fleet Management Inc. for the lease of 119 vehicles. The lease requires monthly payments of approximately $83,000 per month including the cost of maintaining the vehicles, taxes and insurance. The lease commenced when the Company took possession of the majority of the vehicles in the second quarter of 2018 and expires 48 months after the delivery date. As of December 31, 2019, 29 vehicles were removed from the fleet, resulting in a fleet size of 90 vehicles. An additional vehicle was removed from the fleet in 2020. No gain or loss was recorded. The revised monthly payment inclusive of maintenance fees, insurance and taxes is $70,000. The lease expense is included in selling, general and administrative expenses in the accompanying consolidated statement of operations. Upon adoption of ASC 842, the agreement was classified as an operating lease which resulted in recording right-of-use assets and lease liabilities of approximately $1.6 million and $1.9 million, respectively, as of January 1, 2019. These amounts included approximately $1.6 million of non-current other assets and approximately $0.6 million and $1.3 million of other current liabilities and operating lease liabilities, respectively. Office Lease — In May 2017, the Company executed an office lease with Russell Ranch Road II LLC for the Company’s corporate headquarters in Westlake Village, California. The office lease commenced in August 2017. The Company agreed to pay initial monthly lease payments of $40,951, subject to 3% annual increases, plus the estimated cost of maintaining the property and common areas by the landlord, with a five month concession from October 2017 through February 2018. The lease also provides for allowances for tenant alterations and maintenance. The lease expires in January 2023 and provides the Company with a five year renewal option. The lease expense is included in selling, general and administrative expenses in the accompanying consolidated statement of operations. In November 2017, the Company executed an office lease with Russell Ranch Road II LLC to expand the office space for the Company’s corporate headquarters in Westlake Village, California. The office lease commenced in October 2018. The Company agreed to pay initial monthly lease payments of $35,969, subject to a 3% annual increase, plus the estimated operating cost of maintaining the property by the landlord, which are allocable based an annual assessment made by the landlord. In addition, the Company received reimbursement from the landlord of $56,325 for tenant improvements and was not required to pay a first-year common area maintenance fee. The lease expires in January 2023 and provides the Company with a five year renewal option. Upon adoption of ASC 842, this lease was classified as an operating lease which resulted in recording right-of-use assets and lease liabilities of approximately $3.2 million and $3.5 million, respectively, as of January 1, 2019. These amounts included approximately $0.9 million and $2.6 million of other current liabilities and operating lease liabilities, respectively. Operating lease costs under all operating leases including office space and equipment for the year ended December 31, 2020 was approximately $1.4 million. Cash paid for all operating leases for the year ended December 31, 2020 was $1.8 million. Variable lease costs were approximately $0.4 million for the year ended December 31, 2020. The weighted average discount rate used was 7.5%. The weighted-average remaining lease term for all operating leases is 1.9 years. Operating lease costs under all operating leases including office space and equipment for the year ended December 31, 2019 was approximately $1.5 million. Cash paid for all operating leases for the year ended December 31, 2019 was $1.8 million. Variable lease costs were approximately $0.4 million for the year ended December 31, 2019. The weighted average discount rate used was 7.5%. The weighted-average remaining lease term for all operating leases is 3.0 years. Future minimum office and vehicle lease payments as of December 31, 2020 and 2019 were as follows:
|  | December 31, |
|  | 2020 |  |  | 2019 |
2020 |  | $ | — |  |  | $ | 1,470,217 |
2021 |  |  | 1,493,988 |  |  |  | 1,499,484 |
2022 |  |  | 1,238,799 |  |  |  | 1,241,089 |
2023 |  |  | 87,957 |  |  |  | 87,957 |
Total |  | $ | 2,820,744 |  |  | $ | 4,298,747 |

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