OTHER LIABILITIES

12 Months Ended

Dec. 31, 2019

OTHER LIABILITIES

OTHER LIABILITIES

NOTE 6 – OTHER LIABILITIES

The following is a summary of notes payable included in other current liabilities on the Company's consolidated balance sheet:

(in thousands)	December 31, 2019						December 31, 2018
			Non-						Non-
	Current		current				Current		current
	portion,		portion,				portion,		portion,
	net		net		Total		net		net		Total
Convertible 5% Notes Payable	$	190	$	—	$	190	$	67	$	—	$	67
Totals	$	190	$	—	$	190	$	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 $19.3 million at December 31, 2019 and $18.4 million at December 31, 2018. No payments have been made on the 5% Notes through December 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 $47.2 million as of December 31, 2019, which include service fees, raw material costs and administrative fees. No payments have been made to the contract manufacturer as of December 31, 2019. Accordingly, as of December 31, 2019, $47.2 million is included in current liabilities in the Company’s consolidated balance sheet, of which $19.6 million is due in the first quarter of 2020. As of December 31, 2018, $18.4 million is included in long-term liabilities in the Company’s condensed consolidated balance sheet. We will incur an administrative fee of six percent (6%) per year starting from the date of invoice issuance. For the year ended December 31, 2019, we have accrued $1.2 million in administrative fees in connection with these costs, which has been included in interest expense in the Company’s consolidated statements of operations.