Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Commitments and Contingencies

v3.8.0.1
Note 13 - Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
NOTE
13
COMMITMENTS AND CONTINGENCIES
 
(
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 pay
ment 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
and
nine
months ended
September 30, 2017,
rent expense amounted to
$36,658
and
$106,828
respectively. For the
three
and
nine
months ended
September 30, 2016
rent expense amounted to
$25,031
and
$95,019,
respectively.
 
 
(
2
Other Commitments
 
Milestone Scientific's employment agreement (the “
2009
Agreement”) with Leonard Osser, its former Chief Executive Officer, provided 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
and
$152,000
 for the
three
and
nine
months ended
September 30, 2017,
and
2016
respectively to fund this obligation. In
July 2017,
Milestone Scientific entered into a new employment agreement with Mr. Osser, which superseded the
2009
Agreement pursuant to which he stepped down from his position as Chief Executive Officer and became Managing Director – China Operations (see Note
11
).  Pursuant to the new agreement, Milestone Scientific agreed to fund the last installment of
$203,111
in
January 2018
as provided for in the
2009
Agreement. 
 
 
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 until the expiration of the last patent. 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
$122,606
and
$446,098
for the
three
and
nine
months ended
September 30, 2017,
respectively.
The Director of Clinical Affairs
’ royalty fee was
$148,185
and
$449,875
for the
three
and
nine
months ended
September 30, 2016,
respectively. 
Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of
$68,751
and
$206,253
for the
three
and
nine
months ended
September 30, 2017,
and
2016
respectively.
 
In
January 2017,
Milestone Scientific entered into a
12
month agreement with Innovest S.p.A. to provide consulting services. This agreement will renew for successive
12
month terms unless terminated by Innovest S.p.A or Milestone Scientific. Expenses recognized on this agreement were
$20,000
and
$60,000
for the
three
and
nine
months ended
September 30, 2017,
respectively.
 
On
October 2, 2017,
Milestone Scientific accepted the resignation of the then CEO, Daniel Goldberger. Subsequent to that date, Mr. Goldberger through his attorney advised Milestone Scientific
’s attorneys, that Mr. Goldberger was entitled, based on the circumstances he asserted with respect to his resignation after acceptance of such resignation, to his basic salary (
$300,000
) for
one
year and certain other benefits (health and disability insurance for
one
year (
$30,000
estimated) and a car allowance of
$1,200
per month), in accordance with his employment contract dated
July 10, 2017. 
Under the circumstances asserted by Mr. Goldberger, he would also be entitled to the immediate vesting of options under the Milestone Scientific’s Stock Option Plan agreed to be granted to him pursuant to his employment agreement, exercisable for
ninety
days after his resignation, for
921,942
shares of Milestone Scientific at a price of
$2.00
per share, which exercise price is in excess of the market price of Milestone Scientific’s shares on the date hereof.  Milestone Scientific believes that the assertion of Mr. Goldberger is
not
in accordance with the facts or the requirements of his employment contract, and Milestone Scientific intends to vigorously contest his assertion.