Commitments

9 Months Ended

Sep. 30, 2012

Commitments [Abstract]

COMMITMENTS

5. COMMITMENTS

Operating Lease Commitment

The Company leases approximately 1,597 square feet of laboratory and office space in Medford, Massachusetts at a monthly cost of $5,476 under a lease expiring on November 15, 2012.

On November 29, 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, MA (“Cambridge Lease”). The term of this lease is six years and three months, with one five-year extension option. The terms of the initial lease required a standby letter of credit in the amount of $295,000 secured by a deposit with a commercial bank (see Note 3).

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 September 30, 2012, the amount of deferred rent liability is $244,000 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 September 30, 2012, such leasehold improvements totaled $266,000.

Pursuant to the terms of the non-cancelable lease agreements in effect at September 30, 2012, future minimum rent commitments are as follows:

Year Ended December 31,
2012	$	250,550
2013		1,168,659
2014		1,198,265
2015		1,237,533
2016		1,263,642
2017 and thereafter		2,327,367
Total	$	7,446,016

Total rent expense for the nine months ended September 30, 2012 and 2011 including month-to-month leases, was $433,000 and $267,000, respectively. Total rent expense for the three ended September 30, 2012 and 2011 including month-to-month leases, was $218,000 and $88,000, respectively.

Other Commitments

In January 2012, the Company entered into a research contract with the Geisenger Health System under which the Company is obligated to pay Geisenger $150,000 for a pre-clinical study that will evaluate the Company’s hydrogel for the treatment of peripheral nerve injuries. During the first quarter of 2012, the Company made an up-front payment of $60,000 for this study and expensed this cost to Research and Development. During the second and third quarters of 2012, the Company did not make any payments under this contract.