Correction: MannKind converted $8 million of debt into 1.9 million shares of company stock. A typing error in the original version of the story said the conversion was 9 million shares. The story has been corrected. 

VALENCIA, Calif. (TheStreet) -- MannKind (MNKD) failed to settle a $100 million convertible loan before an Aug. 15 deadline. The embattled diabetes-drug company is trying a second time to clear the debt, but on even less favorable terms, which will bleed off a larger chunk of cash.

The slow commercial launch of Afrezza, MannKind's inhaled mealtime insulin, continues to be the root cause of the company's balance-sheet woes. Afrezza prescriptions are stuck in neutral and net sales -- $2.2 million in the just-reported second quarter -- are well below expectations.

Absent any concrete evidence that Afrezza can become a profitable diabetes product, a majority of MannKind's current debt holders refused to exchange their paper for company stock by the August 15 deadline. That lack of confidence in MannKind's future is exacerbating the already-steep slide in the company's market value.

At Wednesday's $3.99 close, MannKind shares are down 24% this year and more than 60% since Afrezza's approval in June 2014.

MannKind's most pressing debt problem centers on a $57 million portion of the $100 million loan, which the company sought to convert into equity via a pricing scheme similar to a death-spiral convert. Over the course of 10 trading days earlier this month, MannKind was only able to convert $8 million of the debt into 1.9 million shares of newly issued company stock, according to its most recent quarterly report filed with the Securities and Exchange Commission.

The refusal of a majority of debt holders to accept MannKind equity ahead of the Aug. 15 deadline forced the company to roll over $32 million in unsettled debt until the end of September and try another stock-for-debt exchange. It's unclear if debt holders will be more amenable to accepting MannKind stock this time around.

Keeping track of the details and numbers is a challenge but here's a simple summary of MannKind's original proposal, announced on July 29, to extinguish the $100 million debt: 1. $28 million rolled over into new, 2018 debt; 2. $57 million converted into MannKind equity; and 3. $15 million repaid with company cash.

That effort failed, so MannKind's Plan B to knock out the $100 million in debt, announced on Aug. 13, looks like this: 1. $28 million rolled over into new, 2018 debt (done); 2. $8 million converted into MannKind equity (done); 3. $32 million converted into MannKind equity (ongoing); and 4. $32 million repaid with company cash (ongoing).

If all goes right, MannKind will use more than twice as much cash ($32 million) to settle the debt than planned originally ($15 million).

If the $32 million in debt cannot be converted into equity, MannKind will be forced to use even more cash, the company warned in its most recent 10-Q.

Worst-case scenario: MannKind could be forced to use $64 million in cash to settle the August 2015 debt, if the stock-for-debt exchange scheme fails again. The company had $107 million in cash on hand as of June 30, of which $25 million is restricted and cannot be touched due to other outstanding debt obligations. Factor in normal operating expenses and MannKind would be essentially insolvent unless a $30 million "rescue" loan available to the company from founder Al Mann is utilized.

Meantime, MannKind's debt owed to Sanofi under the Afrezza marketing joint venture grew by $12.8 million in the second quarter and now totals $28.4 million.

At the end of June, MannKind's total stockholders' deficit was $115 million, up from $74 million at the end of 2014.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

More from Stocks

Southwest Airlines Jumps After Profit Beat

Southwest Airlines Jumps After Profit Beat

Tesla Falls into the Sweet Spot for Traders

Tesla Falls into the Sweet Spot for Traders

JetBlue Rises as Fourth-Quarter Results Beat Forecasts

JetBlue Rises as Fourth-Quarter Results Beat Forecasts

United Technologies Soon Could Retrace More of Its Decline

United Technologies Soon Could Retrace More of Its Decline

Canada Goose Gets Clipped by Wells Fargo Downgrade

Canada Goose Gets Clipped by Wells Fargo Downgrade