Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Commitments and Other

v3.7.0.1
Note 12 - Commitments and Other
3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
NOTE
12
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
and provides for
a monthly lease payment of
$12,522.
Additionally, Milestone Scientific has other smaller insignificant leases ending through
2017.
Further, a
third
party distribution and logistics center in Pennsylvania handles shipping and order fulfillment on a month-to-month basis. For the
three
months ended
March
31,
2017
and
2016,
rent expense amounted to
$34,993,
and
$35,232
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. Milestone Scientific expensed approximately
$51,000
for the
three
months ended
March
31,
2017
and
2016,
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
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
5%
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
$131,908
and
$190,626
for the
three
months ended
March
31,
2017
and
2016,
respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of
$68,751
for the
three
months ended
March
31,
2017
and
2016,
respectively.
 
Subsequent Events
 
Milestone Scientific has evaluated all subsequent events and has determined that there are no events to recognize or disclose in these financial statements.