LONG-TERM LIABILITIES AND NOTES PAYABLE

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

LONG-TERM LIABILITIES AND NOTES PAYABLE

The following is a summary of notes payable and long term liabilities:

 (in thousands)

	December 31, 2018						December 31, 2017
	Current portion, net		Non-current portion, net		Total		Current portion, net		Non-current portion, net		Total
Convertible 5% Notes Payable	$	67	$	--	$	67	$	128	$	--	$	128
Long term liabilities		--		18,350		18,350		128		--		128
Totals	$	67	$	18,350	$	18,417	$	128	$	--	$	128

 Convertible 5% Notes Payable

The 5% Notes and accrued and unpaid interest thereon are convertible at the option of the holder into common stock at the conversion price of $1,125 per share. We have no obligation under the 5% Notes aside from (a) 50% of the net product cash flows from Ariston’s product candidates, if any, payable to noteholders; and (b) the conversion feature, discussed above. Interest accrues monthly, is added to principal on an annual basis, every March 8, and is payable at maturity, which was March 8, 2015 (see Note 4 for further details).

The cumulative liability including accrued and unpaid interest of these notes was approximately $18.4 million at December 31, 2018 and $17.5 million at December 31, 2017. No payments have been made on the 5% Notes as of December 31, 2018.

In December 2011, we elected the fair value option for valuing the 5% Notes. The fair value option was elected in order to reflect in our financial statements the assumptions that market participants use in evaluating these financial instruments (see Note 4 for further details).

Long-Term Liabilities

In 2018, we entered into an agreement with a contract manufacturer for the clinical and potential commercial supply of one of our product candidates. As part of this agreement, the contract manufacturer has agreed to defer payment of certain costs and expenses under the agreement in exchange for the payment of an administrative fee. As of December 31, 2018, we have incurred costs related to this agreement of approximately $18.4 million, which includes both service fees and raw material costs. All costs incurred in 2018 are to be invoiced in 2019 and are due in 2020. We will incur an administrative fee of six percent (6%) per year starting from the date of invoice issuance. No payments have been made to the contract manufacturer as of December 31, 2018 and accordingly the entire amount has been classified as long-term liabilities included in our consolidated balance sheet.