NOTE O — COMMITMENTS AND OTHER

(1) Lease Commitments

The headquarters for Milestone is located at 220 South Orange Ave, Livingston, New Jersey. Milestone leases approximately 6,300 square feet of office space. The lease term expires June 30, 2014 at a monthly cost of $6,942. Milestone has entered negotiation with the landlord to extend this lease for an additional five year period. An agreement for the extension has not been reached. Additionally, Milestone has other smaller insignificant leases ending through 2017.A third party distribution and logistics center in Pennsylvania handles shipping and order fulfillment on a month-to-month basis.

Aggregate minimum rental commitments under noncancelable operating leases are as follows:

	Year Ending December 31,
2014	$	48,962
2015		7,309
2016		5,965
2017		5,965
2018		-
	$	68,201

For the years ended December 31, 2013 and 2012, respectively, rent expense amounted to $41,653 and $83,273 respectively.

(2) Contract Manufacturing Arrangement

Milestone has informal arrangements with the manufacturer of its products. STA, single tooth anesthesia, CompuDent and CompuMed instruments are manufactured for Milestone by Tricor Systems, Inc. pursuant to specific purchase orders. The STA and The Wand Handpiece with Needle are supplied to Milestone by a contractor in the United States, which arranges for its manufacture in China. These contractors provide an informal long term financing basis for Milestone.

The termination of the manufacturing relationship with any of the above manufacturers could have a material adverse effect on Milestone’s ability to produce and sell its products. Although alternate sources of supply exist and new manufacturing relationships could be established, Milestone would need to recover its existing tools or have new tools produced. Establishment of new manufacturing relationships could involve significant expense and delay. Any curtailment or interruption of the supply, whether or not as a result of termination of such a relationship, would adversely affect Milestone.

(3) Other Commitments

The technology underlying the SafetyWand and CompuFlo, and an improvement to the controls for CompuDent were developed by the Director of Clinical Affairs and assigned to us. Milestone purchased this technology pursuant to an agreement dated January 1, 2005, for 43,424 shares of restricted common stock and $145,000 in cash, payable on April 1, 2005. In addition, the Director will receive additional payments of 2.5% of the total sales of products using certain of these technologies, and 5% of the total sales of products using certain other of the technologies. In addition, he is granted, pursuant to the agreement, an option to purchase, at fair market value on the date of the grant, 8,333 shares of the common stock upon the issuance of each additional patent relating to these technologies. If products produced by third parties use any of these technologies (under license from us) then he will receive the corresponding percentage of the consideration received by Milestone for such sale or license. Milestone expensed the Director’s royalty fees of $357,972 and $306,983 in 2013 and 2012, respectively. Additionally, Milestone expensed consulting fee to the Director $99,450 and $156,000 for year ended 2013 and 2012, respectively.

In January 2010, Milestone issued a purchase order to Tricor Instruments for the purchase of 12,000 STA Instruments to be delivered over the next three years. The purchase order is for $5,261,640. As of December 31, 2013, Milestone’s production and sales of instruments to this commitment has been delayed. Consequently, advances to contractor has been classified as current and long term at December 31, 2013.

In August 2013, a shareholder of Milestone entered a three year agreement with the Milestone to provide financial and business strategic services. The fee for these services are $100,000 annually.

In November 2012, Milestone signed an exclusive distributor and marketing agreement with a well known US domestic distributor, for the sale and distribution of the STA instrument and handpieces in the United States and Canada. The marketing initiative will include participation in U.S. and Canada dental shows, as well as pediatric dental shows; an active advertising initiative targeting major dental publications; and direct mailing campaigns to over 15,000 dentists across the U.S. and Canada.

In August 2013, Milestone appointed Henry Schein as its exclusive distributor in the USA and Canada for the CompuDent handpieces.