Note P - Commitments

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE P — COMMITMENTS

(1)  Contract Manufacturing Agreement

Milestone Scientific has informal arrangements with third-party manufacturers of the STA, CompuDent® and CompuMed® devices, pursuant to which they manufacture these products under specific purchase orders but without any long-term contract or minimum purchase commitment. The company entered a new purchase commitment for the delivery of 2,040 STA CompuDent® instruments. As of December 31, 2022, the purchase order commitment was approximately $1.7 million, and approximately $1.2 million was paid and reported in advances on contracts in the consolidated balance sheet. As of  December  31, 2021, the purchase order commitment was approximately $2.6 million, approximately $1.3 million was paid and  reported in advances on contracts in the consolidated balance sheet. As of December 31, 2022 and 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 $76,000 and $34,000, respectively.

(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 year lease in a new facility located in Roseland, New Jersey (the “Roseland Facility”), which commenced of January 8, 2021 . Under the Roseland Facility lease, rent payments commence on April 1, 2021 , 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 December 31, 2022, total finance right-of-use assets were $17,645 and total finance liabilities were $20,063 of which $9,365 and $10,698 were classified as current and non-current, respectively. As of December 31, 2022, total operating right-of use assets were$443,685 and total operating lease liabilities were $476,980, of which $91,701 and $385,279 were classified as current and non-current, respectively.  As of December 31, 2021, total  finance right-of-use assets were $26,294 and total finance liabilities were $28,607 of which $8,545 and $20,062 were classified as current and non-current, respectively. As of December 31, 2021, total operating right-of use assets were $524,217 and total operating lease liabilities were $557,981, of which $81,001 and $476,980 were classified as current and non-current, respectively. 

The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:

● As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has utilized its incremental borrowing rate based on the long-term borrowing costs of comparable companies in the Medical Device industry.

● Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration was allocated to the combined lease component.

● The expected lease terms include non-cancellable lease periods. Renewal option periods are not included in the determination of the lease terms as they were not reasonably certain to be exercised.

The components of lease expense were as follows:

	December 31, 2022			December 31, 2021
Cash paid for operating lease liabilities	$	127,995		$	127,526
Cash paid for finance lease liabilities		10,740			10,740
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
Weighted Average Remaining Lease Term
Finance leases (years)	2.04 years			3.04 years
Operating leases (years)	4.25 years			5.25 years
Weighted-average discount rate – operating leases		9.20	%		9.20	%
Weighted-average discount rate – finance leases		9.20	%		9.20	%

Maturity of lease liabilities as of December 31, 2022	Operating Leases			Finance Leases
2023	$	130,778		$	10,740
2024		133,560			10,740
2025		136,343			433
2026		139,125			-
2027		35,477			-
Total future minimum lease payments		575,283			21,913
Less: interest		(98,303	)		(1,850	)
Present value of lease liabilities	$	476,980		$	20,063