NOTE 6 – NOTES PAYABLE

The following is a summary of notes payable:

	December 31, 2014						December 31, 2013
	Current portion, net		Non- current portion, net		Total		Current portion, net		Non- current portion,net		Total
Convertible 5% Notes Payable	$	275,190	$	-	$	275,190	$	-	$	64,529	$	64,529
ICON Convertible Note		-		-		-		677,778		-		677,778
Totals	$	275,190	$	-	$	275,190	$	677,778	$	64,529	$	742,307

We assumed the preceding notes payable as the result of the transaction between the Company and TGBio. Accordingly, a valuation using the guidance in the accounting literature for business combinations (ASC 805) was performed and these notes have been presented at their fair value on the date of the transaction.

Convertible 5% Notes Payable

At the time of our merger with Ariston in March 2010 (as discussed in Note 4), Ariston issued $15,452,793 of five-year 5% notes payable (the “5% Notes”) in satisfaction of several note payable issuances. 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. Ariston agreed to make quarterly payments on the 5% Notes equal to 50% of the net product cash flow received from the exploitation or commercialization of Ariston’s product candidates, AST-726 and AST-915. We have no obligations 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 is March 8, 2015.

In connection with the exchange transaction with TG Biologics (“TGBio”) in December 2011, we performed a valuation of the assets and liabilities of Manhattan immediately prior to the transaction. The cumulative liability including accrued and unpaid interest of these notes was approximately $16,876,000 immediately prior to the transaction, and $19,544,720 and $18,614,000 at December 31, 2014 and 2013, respectively. As these notes payable are tied directly to net product cash flows derived from the preexisting products of Ariston, this note and accrued interest was recorded at fair value of $3,287,700 as of the date of the transaction. No payments have been made on these notes as of December 31, 2014. See Note 4 for further details.

ICON Convertible Note Payable

As of December 31, 2013, the principal amount of the Amended ICON Note was $677,778, of which the entire balance had been classified as current. Interest payable on the Amended ICON Note was $190,017 as of December 31, 2013. In January 2014, we entered into a settlement and release agreement with ICON related to this note, under which we agreed to pay $772,369 in full settlement of the principal and interest due on this note, resulting in a gain of $95,427.