OTHER LIABILITIES

3 Months Ended

Mar. 31, 2019

Other Liabilities [Abstract]

OTHER LIABILITIES

The following is a summary of Notes Payable included in other current liabilities on the Company’s condensed consolidated balance sheet:

	March 31, 2019						December 31, 2018
(in thousands)	Current portion, net		Non-current portion, net		Total		Current portion, net		Non-current portion, net		Total
Convertible 5% Notes Payable	$	133	$	--	$	133	$	67	$	--	$	67
Total	$	133	$	--	$	133	$	67	$	--	$	67

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 $18.6 million at March 31, 2019 and $18.4 million at December 31, 2018. No payments have been made on the 5% Notes as of March 31, 2019.

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).

Current 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. To date we have incurred expenses related to this agreement of approximately $18.6 million as of March 31, 2019 which includes both service fees and raw material costs. No payments have been made to the contract manufacturer as of March 31, 2019. Accordingly, as of March 31, 2019, $17.8 million is included in current liabilities and $0.8 million is included in accounts payable in the Company’s unaudited condensed consolidated balance sheet. As of December 31, 2018, $18.4 million is included in long term liabilities in the Company’s audited consolidated balance sheet. All costs incurred to date are due in the first quarter of 2020. We will incur an administrative fee of six percent (6%) per year starting from the date of invoice issuance. As of March 31, 2019 we have accrued $0.3 million in administrative fees in connection with these costs, which has been included in interest expense in the Company’s unaudited condensed consolidated statements of operations.