NOTE 10. COMMITMENTS AND CONTINGENCIES

We are obligated under various operating leases for our facilities and certain equipment, most notably a lease for a manufacturing and warehouse facility in St. Petersburg, Florida that requires monthly payments of approximately $13,000 and expires on October 31, 2013. The following is a schedule of approximate future minimum lease payments under operating leases having remaining terms in excess of one year as of March 31, 2013 for the calendar years ended December 31, 2013 and 2014. (in thousands):

2013	$	171
2014		12

Total	$	183

Rent expense approximated $45,000 for the three month periods ending March 31, 2013 and 2012.

We have a manufacturing agreement with our Bulgarian supplier which provides for certain contingent payments on our part if we terminate our arrangement prior to July 1, 2014. The table below reflects our approximate contingent liability for the calendar years ended December 31, 2013, and 2014 (in thousands):

2013	$	96
2014		73

Total	$	169

Other future contractual obligations for agreements with initial terms greater than one year and agreements to purchase materials in the normal course of business are summarized as follows (in thousands):

Description	Years Ending December 31,
	2013			2014			2015			2016			2017			2018
Employment agreements			724			786			725			-			-			-
Purchase commitments			2,574			858			-			-			-			-
Consulting contracts			54			72			-			-			-			-
Long-term debt			103			146			154			164			172			2,646
Total		$	3,455		$	1,862		$	879		$	164		$	172		$	2,646

Livneh/Lican Development Settlement Agreement and Related Litigation

In July 2012, Steven Livneh and two of his related entities, Henvil Corp. Ltd. and Lican Development Ltd., commenced a new action against us, Andrew Makrides, and Moshe Citronowicz, in the United States District Court for the Middle District of Florida (Tampa Division). The complaint asserts, among other things, that (i) the defendants breached their obligations to the plaintiffs under Settlement Agreement dated February 22, 2012, and effective as of December 28, 2011, the terms of which have been disclosed in our previous filings, by allegedly failing to take certain actions that facilitated the plaintiffs' marketing and sale of the Seal-N-Cut products in the People's Republic of China ("PRC"), (ii) that defendants tortiously interfered with plaintiffs' business relationships and expectations in PRC allegedly by, among other things, refusing to provide plaintiffs with an ICON VS generator and (iii) plaintiffs allegedly suffered damages as a result of defendants' breaches and misrepresentations. The complaint seeks, among other things, the following: (i) compensatory damages in excess of $10 million, (ii) an order directing Bovie to provide plaintiffs with an ICON VS generator, (iii) an assignment to plaintiffs of all patents identified in the Settlement Agreement, and (iv) rescission of the Settlement Agreement. We believe the allegations to be frivolous and without merit, and we intend to defend the action vigorously. On July 24, 2012, we filed a motion to dismiss the complaint and to compel arbitration. The plaintiffs opposed the motion, and the motion was subsequently withdrawn as moot due to the non-availability of the stipulated arbitrator. Pursuant to the Case Management and Scheduling Order entered by the Court at the outset of the case, the deadline to complete factual discovery expired on April 19, 2013, however, we filed a motion to extend the deadline to complete additional discovery. The motion is presently subjudice.

The outcome of this matter is uncertain, no range of potential loss can be estimated and accordingly no effect has been given to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements.

Stockholder Derivative Action

As previously reported, in September 2011, we were served in a purported stockholder derivative action that was filed in the United States District Court for the Middle District of Florida against the Company and certain of its present and former officers and directors. The complaint asserts, among other things, breach of fiduciary duties and bad faith in relation to the management of our business. The complaint seeks, among other things, unspecified compensatory damages and various forms of equitable relief. The allegations in the derivative action appear to be based largely on the January 10, 2011 Livneh counterclaim described above.

On March 29, 2012, plaintiffs amended their complaint to remove one of the plaintiffs and replace it with another. The amended complaint asserts essentially the same allegations as the original filing. We believe the allegations to be frivolous and without merit and we intend to defend the action vigorously. We are investigating whether there is a collusive connection between the derivative action and the previously settled lawsuit with Livneh.

In May 2012, we, together with the individual defendants filed a motion to dismiss the plaintiff's complaint based, in part, upon the plaintiff's failure to make demand upon the board as required by applicable law. The motion was denied and the parties are proceeding with discovery. The outcome of this matter is uncertain, no range of potential loss can be estimated and accordingly no effect has given to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements.

Keen Action

In February 2012, Leonard Keen our former Vice President and General Counsel, commenced an action against us in United States District Court for the Middle District of Florida, related to his termination on December 9, 2011 and associated employment contract. Mr. Keen demands amounts outlined under his employment contract which provided for the payment of a base annual salary of not less than $187,500 as well as certain other payments and benefits. The employment agreement also provided for the payment, under certain circumstances, of a lump sum severance payment equal to three times base compensation plus certain other payments and benefits as set forth in the employment agreement under severance payment. Mr. Keen also asserts a claim concerning an alleged violation of Florida's "Whistle Blower's Act" and seeks specific performance of certain indemnification rights under his employment agreement.

On April 27, 2012, we filed an Answer and Counterclaims against Mr. Keen alleging violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(5), breaches of fiduciary duties, conversion, and fraud in the inducement. The counterclaims seek monetary damages, including attorney's fees, and a declaration that Mr. Keen's employment agreement is unenforceable as violative of Florida law and public policy.

On July 3, 2012, plaintiff filed an Amended Complaint which repeats the same allegations as the original filing and also added Andrew Makrides, our Chief Executive Officer, as a defendant and asserts additional claims concerning an alleged violation of ERISA and an alleged tortious interference with the plaintiff's employment contract by Andrew Makrides.

On July 16, 2012, we served our Answer to the Amended Complaint and Counterclaims, which repeated the same counterclaims as our Answer and Counterclaims. On the same date, we also moved to dismiss the Amended Complaint for failure to state a claim upon which relief can be granted and lack of subject matter jurisdiction. Plaintiff opposed the motion and also sought to renew his motion to dismiss our Second and Third Counterclaims (breach of fiduciary duty).

On September 27, 2012, the Court granted our motion in part and denied it in part and also denied Keen's motion in its entirety. Specifically, the Court dismissed Keen's Second (breach of covenant of good faith and fair dealing) and Eighth (tortious interference with employment contract) claims for relief. Because the Eighth claim was the only one asserted against Andrew Makrides, our Chief Executive Officer, he is no longer a party to the case.

On May 7, 2013, the Court issued its Order on the parties' respective summary judgment motions. On Keen's first count (breach of contract), the Court denied our motion to invalidate Keen's employment agreement on the grounds that it violates public policy and that Keen failed to comply with conditions precedent to his right to severance and granted Keen partial summary judgment by determining that Keen's termination was "without cause." The Court also denied our motion with respect to Keen's third claim (unpaid wages). The Court granted our motion for judgment as a matter of law as to Keen's fourth (violation of Florida's Whistleblower Act) and seventh (violation of ERISA) claims.

The Court denied in part and granted in part Keen's motion with respect to our first counterclaim (violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(5)). The Court granted Keen's motion with respect to the Company's allegation that Keen violated 18 U.S.C. § 1030(a)(5)(B) and (C), but denied Keen's motion concerning his alleged violation of 18 U.S.C. § 1030(a)(5)(A). The Court concluded that Keen's testimony wherein he admitted that he used a program to wipe clean the hard drive of a Company-owned computer constitutes damage within the meaning of 18 U.S.C. § 1030(a)(5)(A). The Court denied summary judgment to either party with respect to our second (breach of fiduciary duty concerning negotiation and drafting of employment agreement) and third (breach of fiduciary duty relating to Keen's deletion of materials from a Company-owned computer) counterclaims, finding issues of fact requiring a trial. The Court denied Keen's motion with respect to our fourth (conversion), fifth (fraud in the inducement), and seventh (attorney's fees) counterclaims. The Court granted Keen's motion as to our sixth counterclaim which sought a declaration that Keen's employment agreement was unenforceable as violative of public policy.

Trial of the remaining claims and counterclaims is scheduled in the month of June 2013.

We believe we have meritorious defenses against Mr. Keen's claims and are vigorously defending this action. The outcome of this matter is uncertain and accordingly no effect has been given to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements, however the range of potential loss is zero to approximately $600,000, plus possible attorney fees which are not determinable at this time.

In addition to the above, in the normal course of business, we are subject, from time to time, to legal proceedings. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of March 31, 2013. These matters could affect the operating results of any one or more quarters when resolved in future periods.

We expense costs of litigation related to contingencies in the periods in which the costs are incurred.