NOTE

— COMMITMENTS

(

) Contract Manufacturing Agreement

Milestone Scientific has informal arrangements with

third

-party manufacturers of the STA, epidural, and intra-articular devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. In

January 2021,

the Company entered into a new purchase commitment for the delivery of

2,000

dental instruments beginning in

2021.

As of

March 31, 2021

, the purchase order commitment for dental instruments was approximately

$1.5

million and advances of approximately

$504,000

are reported in advances on contracts in the unaudited condensed consolidated balance sheet.

As of

March 31, 2021

, the Company has an open purchase order of approximately

$102,000

for

100

Epidural instruments and has advanced approximately

$54,000,against

this purchase commitment. In

January 2021,

the Company entered a new purchase commitment for the delivery of

100

Epidural instruments beginning in

2021.

As of

March 31, 2021

, the purchase order commitment for epidural instruments was approximately

$328,000

and advances of approximately

$150,000

are reported in advances on contract in the unaudited condensed consolidated balance sheet.

February

2021,

the company entered a new purchase commitment for the delivery of

246

cases of Epidural and CathCheck disposable kits beginning in

April

2021.

As of

March 31, 2021

, we have an open purchase order of approximately

$58,000

for

246

cases of Epidural and CathCheck disposable kits and have advanced

approximately$44,000

reported in advances on contract in the unaudited condensed consolidated balance sheet.

(

) Leases

Operating Leases

June 2015,

the Company amended its original office lease for its headquarters in Livingston, New Jersey. Under the amendment, the Company leased an additional

774

square feet of rentable area of the building and extended the term of the lease through

January 31, 2020

at a monthly cost of

$12,522.

The Company had an option to further extend the term of the lease, however, this option was

not

included in the determination of the lease's right-of-use asset or lease liability. Per the terms of the lease agreement, the Company did

not

have a residual value guarantee. The Company was required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts. These costs were considered to be variable lease payments and were

not

included in the determination of the lease's right-of-use asset or lease liability.

August 2019,

the Company made the decision to

not

renew the existing office lease for it's corporate headquarters located in Livingston, New Jersey and instead signed a new

seven

(

) year lease in a new facility located in Roseland, New Jersey (the “Roseland Facility”), which commenced of

January 8, 2020.

Under the Roseland Facility lease, rent payments commenced on

April 1, 2020

and the monthly lease payments escalate annually on

January 1

of each year, and range from

$9,275

$10,898

per month over the lease term. The Company is also required to pay a fixed electric charge equal to

$2.00

per square foot which is paid in equal monthly installments over the lease term or

$11,130

annually. These fixed monthly payments have been included in the measurement of the operating lease liability and related operating lease right-of-use asset as the Company has elected the practical expedient to

not

separate lease and non-lease components for all leases. The Company is also required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts, which are accounted for as variable lease expenses.

As of

March 31, 2021,

total operating lease right-of-use assets were

$579,990

and total operating lease liabilities were

$612,016,

of which

$73,596

and

$538,421

were classified as current and non-current, respectively. As of

March 31, 2021,

total finance lease liabilities were

$34,521,

of which

$7,977

and

$26,544

were classified as current and non-current, respectively. As of

December 31, 2020,

total operating lease right-of-use assets were

$597,770

and total operating lease liabilities were

$630,012,

of which

$72,031

and

$557,981

were classified as current and non-current, respectively. As of

December 31, 2020,

total finance lease liabilities were

$36,403,

of which

$7,796

and

$28,607

were classified as current and non-current, respectively.

Cash flow information related to the Company's right-of-use assets and related lease liabilities were as follows:

	Three months ended March 31,
Lease cost	2021		2020
Cash paid for operating lease liabilities		31,303		17,264
Cash paid for finance lease liabilities		2,685		2,252
Right-of-use assets obtained in exchange for new operating lease liabilities (1)				663,009
Property and equipment obtained in exchange for new finance lease liabilities				43,242
(1) For the three months ended March 31, 2021, the balance includes operating leases existing as of the adoption of ASC 842 on January 1, 2021.

Weighted-average remaining lease term - operating leases (years)		6.0		7.0
Weighted-average remaining lease term- finance leases (years)		3.8		4.8

(

) Other Commitments

The technology underlying the

Safety Wand

® and

CompuFlo

®, and an improvement to the controls for

CompuDent

® were developed by Mark Hochman, the Company's Director of Clinical Affairs, and assigned to Milestone Scientific. Milestone Scientific purchased this technology pursuant to Technology Sale Agreement, dated

January 1, 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

(or

2.5%

effective as of

May 9, 2027 –

see below) of the total sales of products using certain other of the technologies until the expiration of the last patent covering 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 (see Note

October 13, 2020,

Milestone Scientific announced a Group Purchasing Agreement with Premier, a leading healthcare improvement company. The Agreement, which became effective

November 1, 2020,

allows Premier members, at their discretion, to take advantage of special pricing and terms pre-negotiated by Premier for the CompuFlo® Epidural System and CathCheck™. This agreement expires on

February 28, 2022.

March 2, 2021,

Milestone Scientific entered into a Royalty Sharing Agreement with Leonard Osser, the Company's Interim Chief Executive Officer, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mr. Hochman, and the Company agreed to pay to Mr. Osser, beginning

May 9, 2027,

half of the royalty (

2.5%

) on net sales that would otherwise be payable to Mr. Hochman and his wife under the Technology Sale Agreement referred to above, the Hochman's having agreed with the Company pursuant to an addendum to such Technology Sale Agreement dated

February 25, 2021

to reduce from

2.5%

the payments due to them on

May 9, 2027

and thereafter, with respect to dental products.