Note 13 - Commitments

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 13 — COMMITMENTS

(1)  Contract Manufacturing Agreement 

Milestone Scientific has informal arrangements with third-party manufacturers of the STA, CompuDent® devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. The Company has an open purchase commitment for the delivery of 2,410 STA CompuDent® instruments. 

As of September 30, 2022, the purchase order commitment was approximately $1.9 million and advances of approximately $1.5 million are reported in advances on contracts in the condensed consolidated balance sheet. As of September 30, 2022, the Company made advanced payments of approximately $1.3 million for a purchase commitment for STA instruments, sound chips for future instruments of approximately $191,000 and advanced to customers for handpiece replacement of approximately $23,000 from market withdrawal in May 2022 are reported in advances on contracts in the condensed consolidated balance sheet. As of December 31, 2021, the purchase order commitment was approximately $2.6 million and advances of approximately $1.3 million are reported in advances on contracts in the condensed consolidated balance sheet. 

As of September 30, 2022, the company also had advances on an open purchase order for long lead items for a future purchase order for the manufacturing of Epidural instrument of approximately $41,000 and advanced to customers for handpiece replacement of $34,000 from market withdrawal in  May 2022 a reported in advances on contracts in the condensed consolidated balance sheet. The advance is classified as current based on the estimated annual usage of the underlying inventory. As of December 31, 2021, the company also has advances on an open purchase order for long lead items for a future purchase order for the manufacturing of Epidural instrument of approximately $34,000 reported in advances on contracts in the condensed consolidated balance sheet. The advance is classified as current based on the estimated annual usage of the underlying inventory.

(2)  Leases

Operating Leases

In August 2019, the Company made the decision to not renew its existing office lease for its corporate headquarters located in Livingston, New Jersey and instead signed a new seven (7) 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 to $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 more than new base year amounts, which are accounted for as variable lease expenses. 

As of September 30, 2022, total operating lease and finance right-of-use assets were $484,327 and total operating lease and finance liabilities were $497,931, of which $88,933 and $408,998 were classified as current and non-current, respectively. As of September 30, 2022, total finance lease liabilities were $22,273 of which $9,153 and $13,120 were classified as current and non-current, respectively. As of December 31, 2021, total operating lease and finance right-of-use assets were $550,511 and total operating lease and finance liabilities were $577,981, of which $81,001 and $476,980 were classified as current and non-current, respectively. As of December 31, 2021, total finance lease liabilities were $28,607, of which $8,545 and $20,062 were classified as current and non-current, respectively. 

The components of lease expense were as follows:

	Three months ended				Nine months ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Cash paid for operating lease liabilities		31,999		31,882		95,996		95,645
Cash paid for finance lease liabilities		2,685		2,685		8,055		8,055
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
								0.00	%
Weighted Average Remaining Lease Term
Finance leases (years)					2.3		5.5
Operating leases (years)					4.5		3.3

(3) Other Commitments

On March 2, 2021, Milestone Scientific entered into a Royalty Sharing Agreement with Leonard Osser, the Company’s  then 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 5% to 2.5% the payments due to them on May 9, 2027 and thereafter, with respect to dental products.