NOTE 7. LEASES

In April 2011, the Company's corporate headquarters lease expired, and the Company did not exercise its renewal option. The company is currently leasing temporary offices. The temporary offices are expected to be utilized for several months at a rental rate of approximately $8,000 per month. The current rental agreement is on a month-to-month basis and there were no long-term commitments at December 31, 2011. On October 21, 2011, Arrowhead acquired the RNAi operations from Roche, including its research facility in Madison, Wisconsin. Its lease expires on February 28, 2019; monthly rental expense is approximately $20,000, and monthly payments under a capitalized lease are approximately $21,000. Other monthly rental expenses include common area maintenance, real estate taxes and utilities, which increase total monthly expenditures to approximately $72,000.

Facility and equipment rent expense for the three months ended December 31, 2011 and 2010 was $90,000 and $41,000, respectively. From inception to date, rent expense was $3,735,485. Rent expense related to Unidym, until its disposal in January 2011, is included as a part of income/loss from discontinued operations.

As of December 31, 2011, future minimum lease payments under capitalized leases are as follows:


2012	$	256,846
2013		256,846
2014		256,846
2015		256,846
2016		256,846
2017 and thereafter		556,499
Less interest		(186,804	)

Principal		1,653,925
Less current portion		209,555

Noncurrent portion	$	1,444,370

As of December 31, 2011, future minimum lease payments under operating leases are as follows:


2012		$225,954
2013		231,581
2014		237,242
2015		243,252
2016		249,333
2017 and thereafter		561,077

Total	$	1,738,439