NOTE O

— COMMITMENTS AND OTHER

(1)

Lease Commitments

The headquarters for Milestone Scientific is located at

220

South Orange Ave, Livingston, New Jersey. Milestone Scientific leases approximately

7,625

square feet of office space. The lease term expires

January

31,

2020

at a monthly cost of

$12,522.

Additionally, Milestone Scientific has other smaller insignificant leases ending through

2017.

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,
2017		150,264
2018		150,264
2019		161,532
2020		152,142
	$	614,202

For the years ended

December

31,

2016

and

2015,

respectively, rent expense amounted to

$133,657and

$121,866

respectively.

(2)

Contract Manufacturing Arrangement

Milestone Scientific has informal arrangements for the manufacture of its product, The

STA Single Tooth Anesthesia System®

instrument is manufactured for Milestone Scientific by Tricor Systems, Inc. pursuant to specific purchase orders. The STA and the Wand® Handpiece with Needle is supplied to Milestone Scientific by a contractor in the United States, which arranges for its manufacture with

two

factories in China.

The termination of the manufacturing relationship with any of the above manufacturers could have a material adverse effect on Milestone Scientific’s ability to produce and sell its products. Although alternate sources of supply exist and new manufacturing relationships could be established, Milestone Scientific 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 have a material adverse effect on Milestone Scientific’s financial condition, business and results of operations.

(3)

Other Commitments

Milestone Scientific's employment agreement with its Chief Executive Officer

provides for payments of

$203,111

per year for

five

years to the executive, or as he directs such payments, to a

third

party to fund his acquisition of, or contribution to, an annuity, pension, or deferred distribution plan; or for an investment for the benefit of the executive and his family. For the

twelve

months ended

December

31,

2016

and

2015

approximately

$203,111

and

$236,963

was charged to expense, respectively to fund this obligation.

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 Milestone Scientific. Milestone Scientific purchased this technology pursuant to an agreement dated

January

2005.

The Director of Clinical Affairs will receive additional payments of

2.5%

of the total sales of products using certain of these technologies, and

of the total sales of products using certain other of the technologies. The Director of Clinical Affairs was granted, pursuant to the agreement, an option to purchase, at fair market value on the date of the grant

8,333

shares of 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 the Director of Clinical Affairs will receive the corresponding percentage of the consideration received by Milestone Scientific for such sale or license.

The Director of Clinical Affairs’ royalty fee was

$526,737

and

$442,763

for the

twelve

months ended

December

31,

2016

and

2015,

respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of

$275,000

and

$185,751

for the

twelve

months ended

December

31,

2016

and

2015,

respectively.