4.   Restricted Cash

Intermezzo Reserve

In accordance with the Merger Agreement, an initial amount of $3.0 million, or the Intermezzo Reserve, has been kept in a separate segregated bank account established at the closing date of the Merger. This account is utilized solely at the direction and in the discretion of the special committee of the Board of Directors of the Company, or the Special Committee, or its authorized delegates in connection with the Special Committee’s management of the Intermezzo product rights and potential disposition. The balance was $2.8 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.

Included in the balance of restricted cash as of September 30, 2016 is $0.7 million of royalty income received but not yet paid to former Transcept stockholders. The remaining balance of the Intermezzo Reserve, after deducting activity during the month of October 2016, as well as any outstanding royalty payments will be made to former Transcept stockholders shortly after the second anniversary of the Merger. Refer to Note 10, Fair Value of Financial Instruments, for further detail.

Letters of Credit

During the first quarter of 2016, the Company obtained a letter of credit in the amount of $0.8 million, which is collateralized with a bank account at a financial institution, to secure value-added tax registration in certain foreign countries. During the third quarter, the letter of credit was cancelled by the Company. The Company plans to obtain a new letter of credit during the fourth quarter of 2016 for the same value, dependent upon currency rates as of the date the letter of credit is obtained.

The Company leases its Boston, Massachusetts office space under a non-cancelable operating lease. Refer to Note 14, Commitments and Contingencies, for further details. In accordance with the lease, the Company has a cash-collateralized irrevocable standby letter of credit in the amount of $0.3 million as of September 30, 2016 and December 31, 2015, naming the landlord as beneficiary.