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 and therefore has not recorded any liability for these indemnities in the condensed consolidated balance sheets. 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 March 31, 2023, the Company believes that the final disposition of such matters will not have a material adverse effect on the results of operations, financial position, 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.

Contingencies — In July 2013, the Company entered into the Milestone Rights Agreement with the Original 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, $60.0 million of which remains payable to the Milestone Purchasers upon achievement of such milestones (see Note 9 – Borrowings).

Sale-Leaseback Transaction— In November 2021, the Company sold the Property to the Purchaser for a sales price of $102.3 million, subject to terms and the conditions contained in a purchase and sale agreement.

Effective with the closing of the Sale-Leaseback Transaction, the Company and the Purchaser entered into a lease agreement (the “Lease”), pursuant to which the Company leased the Property from the Purchaser for an initial term of 20 years, with four renewal options of five years each. The total annual rent under the Lease starts at approximately $9.5 million per year, subject to a 50% rent abatement during the first year of the Lease, and will increase annually by (i) 2.5% in the second through fifth year of the Lease and (ii) 3% in the sixth and each subsequent year of the Lease, including any renewal term. The Company is responsible for payment of operating expenses, property taxes and insurance for the Property. The Purchaser will hold a security deposit of $2.0 million during the Lease term. Pursuant to the terms of the Lease, the Company has four options to repurchase the Property, in 2026, 2031, 2036 and 2041, for the greater of (i) $102.3 million and (ii) the fair market value of the Property.

Effective with the closing of the Sale-Leaseback Transaction, the Company and the Purchaser also entered into a right of first refusal agreement (the “ROFR”), pursuant to which the Company has a right to re-purchase the Property from the Purchaser in accordance with terms and conditions set forth in the ROFR. Specifically, if the Purchaser receives, and is willing to accept, a bona fide purchase offer for the Property from a third-party purchaser, the Company has certain rights of first refusal to purchase the Property on the same material terms as proposed in such bona fide purchase offer.

As of March 31, 2023, the related financing liability was $104.0 million, which was recognized in the condensed consolidated balance sheet and of which $94.4 million was long-term and $9.6 million was current. As of December 31, 2022, the related financing liability was $104.1 million, of which $94.5 million was long-term and $9.6 million was current.

Financing liability information was as follows:


	March 31, 2023			December 31, 2022
Weighted average remaining lease term (in years)		18.6			18.8
Weighted average discount rate		9.0	%		9.0	%


	Three Months Ended March 31,
	2023		2022
Interest expense on financing liability	$	2,424	$	2,371

The Company's remaining financing liability payments were as follows (in thousands):


	March 31, 2023
2023	$	7,340
2024		10,018
2025		10,269
2026		10,533
2027		10,849
Thereafter		188,453
Total		237,462
Interest payments		(130,563	)
Debt issuance costs		(2,832	)
Total financing liability	$	104,067

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 May 2021, the Company and Amphastar amended the Insulin Supply Agreement to extend the term and restructure the annual purchase commitments. The Company's remaining purchase commitments were as follows (€ in millions):


	March 31, 2023
2023		6.8
2024		14.6
2025		15.5
2026		19.4
2027		9.2

Pursuant to the amendment, the term of the Insulin Supply Agreement expires on December 31, 2027, unless terminated earlier, 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.

Vehicle Leases – During the second quarter of 2018, the Company entered into a master lease agreement with Enterprise Fleet Management Inc. The monthly payment inclusive of maintenance fees, insurance and taxes is approximately $0.1 million. The lease expense is included in selling expenses in the condensed consolidated statements of operations.

Office Leases — In May 2017, the Company executed an office lease with Russell Ranch Road II LLC for the Company’s corporate offices in Westlake Village, California. The office lease commenced in August 2017. 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 offices in Westlake Village, California which was renewed in April 2022. Pursuant to the renewal, the monthly payments of $79,543 began in February 2023, subject to 3% annual increases, plus the estimated cost of maintaining the property and common areas by the landlord, and further subject to a six-month base rent concession beginning February 2023. The Company is also entitled to a one-time allowance up to $0.9 million as reimbursement for tenant improvements or the purchase of furniture, fixtures or equipment. Of the $0.9 million allowance, an amount up to $0.7 million may be applied as an additional base rent concession. The Company has no further right to extend the lease term beyond July 31, 2028.

In May 2022, the Company assumed certain leased real property (the “Marlborough Lease”) in connection with the V-Go acquisition. The Marlborough Lease pertains to certain premises in a building located in Marlborough, Massachusetts. The monthly payments of $28,895 began in June 2022, subject to approximately 3% annual increases through February 28, 2026.

The Company also acquired rights to a manufacturing service agreement where V-Go is manufactured using Company-owned equipment located at the manufacturing facility. The Company determined that this arrangement results in an embedded lease which

granted the Company exclusive use of space within the manufacturing facility. The Company assessed the embedded lease cost to be $14,370 per month through February 28, 2026.

Lease information was as follows (in thousands):


	March 31, 2023			December 31, 2022
Operating lease right-of-use assets(1)	$	5,648		$	6,714

Operating lease liability-current(2)	$	851		$	1,304
Operating lease liability-long-term		4,879			5,343
Total	$	5,730		$	6,647

Weighted average remaining lease term (in years)		4.4			4.6
Weighted average discount rate		7.3	%		7.3	%

_________________________

(1)

Operating right-of-use assets related to vehicles, offices and the manufacturing facility are included in other assets in the condensed consolidated balance sheets.

(2)

Operating lease liability – current are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.


	Three Months Ended March 31,
	2023		2022
Operating lease costs	$	422	$	288
Variable lease costs		36		86
Cash paid		323		442

The Company's future minimum office and vehicle lease payments were as follows (in thousands):


	March 31, 2023
2023	$	662
2024		1,496
2025		1,861
2026		1,140
2027		1,072
Thereafter		643
Total		6,874
Interest expense		(1,144	)
Total operating lease liability	$	5,730