17. COMMITMENTS AND CONTINGENCIES

On November 30, 2011 and as amended on September 17, 2012, the Company entered into a commercial lease for 26,150 square feet of office, laboratory and manufacturing space in Cambridge, Massachusetts ("Cambridge Lease"). The term of this lease is six years and three months, with one five-year extension option. The terms of the lease requires a standby letter of credit, as amended, in the amount of $311,365 (see Note 2).

The Cambridge Lease contains rent holidays and rent escalation clauses. The Company recognizes rent expense on a straight-line basis over the lease term and record the difference between the amount charged to expense and the rent paid as a deferred rent liability. As of December 31, 2013, the amount of deferred rent liability is $553,285 and is included in Accrued expenses.

It is the Company's policy to assess whether improvements made to the space rented under operating leases should be accounted for as lessor or lessee assets. If the landlord/lessor makes the improvements and presents us with the finished space on a "turnkey" basis, we view the assets as being lessor assets. When the Company does the remodeling work and receives an allowance that may or may not cover all the costs, the Company makes a judgment as to the classification between lessor and lessee assets. The Company considers an asset to be a lessor asset if all of the following criteria are met:

•

the lease specifically requires the lessee to make the improvement,

•

the improvement is fairly generic,

•

the improvement increases the fair value of the property to the lessor, and

•

the useful life of the improvement is longer than our lease term.

If any of the above criteria are not met, the Company considers the assets to be lessee assets, which are recorded as leasehold improvements in the balance sheet and payments received from the lessor to fund any portion of the cost of lessee assets are accounted for as lease incentives. Assets considered to be lessor assets are not reflected in the Company's Consolidated Balance Sheets. To the extent that the Company paid for such lessor assets and was not reimbursed through construction allowances, such net payments are recorded as leasehold improvements, which are amortized to rent expense over the lease term. As of December 31, 2013, such leasehold improvements totaled $381,225.

Pursuant to the terms of the non-cancelable lease agreements in effect at December 31, 2013, the future minimum rent commitments are as follows:

Year Ended December 31,

2014		1,202,585
2015		1,242,559
2016		1,268,708
2017		1,294,860
2018		1,049,420


Total	$	6,058,132

Total rent expense for the years ended December 31, 2013, 2012, and 2011, including month-to-month leases, was $1,125,000, $758,000, and $357,000, respectively.

On September 4, 2013, the Company entered into a legal settlement agreement for approximately $286,000, in connection with the settlement of outstanding litigation, which has been included in the deferred rent liability and the benefit will be amortized over the remainder of the lease term.

Litigation

The Company has certain claims and pending legal proceedings in the ordinary course of business. In the opinion of management, such proceedings are not expected to have a material adverse effect on the Company's financial position, results of operations and cash flows.

In November 2013, we filed a lawsuit against Francis Reynolds, the Company's former Chairman, Chief Executive Officer and Chief Financial Officer, in Middlesex Superior Court, Middlesex County, Massachusetts (InVivo Therapeutics Holdings Corp. v. Reynolds, Civil Action No. 13-5004). The complaint alleges breaches of fiduciary duties, breach of contract, conversion, misappropriation of corporate assets, unjust enrichment, corporate waste, and seeks money damages and an accounting. The lawsuit involves approximately $500,000 worth of personal and/or exorbitant expenses that the Company alleges Mr. Reynolds inappropriately caused the Company to pay while he was serving as the Company's Chief Executive Officer, Chief Financial Officer, President and Chairman of the Board of Directors. On December 6, 2013, Mr. Reynolds answered the complaint, and filed counterclaims against the Company and its Board of Directors. The counterclaims allege two counts of breach of contract, two counts of breach of the covenant of good faith and fair-dealing, and tortious interference with a contract, and seek monetary damages and a declaratory judgment. The counterclaims involve Mr. Reynolds's allegations that the Company and the Board interfered with the performance of his duties under the terms of his employment agreement, and that Mr. Reynolds was entitled to additional shares upon the exercise of certain stock options. On January 9, 2014, the Company and directors named in the counterclaims filed their answer. We expect discovery to begin soon. No judgments or rulings are pending at this early stage. We do not believe that the pending actions will materially impact the financial condition of the Company.