Note O - Commitments

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE O — 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 into a new purchase commitment for the delivery of 2,200 STA CompuDent® instruments. As of December 31, 2023, the purchase order commitment was approximately $2.3 million, and approximately $1.3 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2022, the purchase order commitment was approximately $1.7 million, and approximately $1.2 million was paid and reported in advance on contracts in the consolidated balance sheet. As of December 31, 2023 and 2022 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, 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, 2023, total finance right-of-use assets were $8,998 and total finance liabilities were $10,698 of which $10,264 and $434. were classified as current and non-current, respectively. As of December 31, 2023 total operating right-of use assets were $355,235 and total operating lease liabilities were $385,280, of which $103,427 and $281,853 were classified as current and non-current, respectively.  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. 

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, 2023		December 31, 2022
Cash paid for operating lease liabilities	$	127,526	$	127,995
Cash paid for finance lease liabilities		10,740		10,740
Right-of-use assets obtained in exchange for new operating lease liabilities (1)
Property and equipment obtained in exchange for new finance lease liabilities
Weighted Average Remaining Lease Term
Finance leases (years)		1.04 years		2.04 years
Operating leases (years)		3.25 years		4.25 years
Weighted-average discount rate – operating leases
Weighted-average discount rate – finance leases

Maturity of lease liabilities as December 31, 2023	Operating Lease			Finance Lease
2024		133,560			10,740
2025		136,343			433
2026		139,125			-
2027		35,477			-
Less: Interest		444,505			11,173
Present Value of lease liabilities		(59,225	)		(475	)
		385,280			10,698