Note 14 - Related Party Transactions

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

14

 -- RELATED PARTY TRANSACTIONS

United Systems

Milestone Scientific has a manufacturing agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal manufacturers of its handpieces, pursuant to which it manufactures products under specific purchase orders, but without minimum purchase commitments. Purchases from this manufacturer were

$222,408

and

$573,688

for the

three

and

six

months ended

June 30, 2018,

respectively. Purchases from this manufacturer were

$584,792

and

$1,037,144

for the

three

and

six

months ended

June 30, 2017,

respectively.  As of

June 30, 2018,

and

December 31, 2017,

Milestone Scientific owed this manufacturer

$1,096,861

and

$985,678,

respectively, which is included in accounts payable, related party on the condensed consolidated balance sheet.

During the

three

months ended

June 30, 2018

Milestone Scientific through its wholly owned subsidiary, Wand Dental, entered into an agreement with United Systems, a related party. The agreement was a Royalty Agreement for handpieces sold to Milestone China by United Systems. United Systems will pay Wand Dental a royalty equal to the net profit that Wand Dental would have received if the handpieces were sold directly to Milestone China or its Agent. As of

June 30, 2018,

Wand Dental has deferred royalty income of

$342,540

 which will be recognized at the earlier of when payment of the royalties is received from United Systems or when collectability is deemed to be assured. As of

June 30, 2018,

$342,540

 related to this transaction is included in accounts receivable, related party and deferred revenue, related party from Milestone China disclosed below.

A

second

agreement represents a Distribution agreement between Wand Dental and United Systems.  United Systems purchased

1000

STA instruments in

June 2018,

for delivery to Milestone China. Due to the related party nature and collectability concerns Wand Dental has deferred the sale. Milestone Scientific had approximately

$750,000

of related party sales of devices to Milestone China  under the agreement with United Systems for

three

and

six

months ended

June 30, 2018.

As of

June 30, 2018

Milestone, Scientific recorded accounts receivable, related party and deferred revenue, related party of

$750,000

and deferred cost, related of  

$686,365,

respectively. The deferred revenue, accounts receivable and deferred cost from this transaction are included in accounts receivable, deferred revenue and deferred cost related to Milestone China disclosed below.

Milestone China

As of

March 2, 2018,

the promissory note (See note

4

) was in default. In

April 2018,

Milestone Scientific entered into a Release, Assignment and Termination Agreement (the “Termination Agreement”) with the issuer of the promissory note, pursuant to which, Milestone Scientific repaid the

$250,000

payment made by the issuer and the issuer returned the  shares of Milestone China’s common stock to Milestone Scientific and cancelled the promissory note.

Milestone Scientific defers the total revenue and costs of goods sold when instruments and handpieces are shipped to Milestone China and Milestone China’s agents due to market conditions, and Milestone China liquidity concerns until a payment is received. As of  

June 30, 2018,

Milestone Scientific had accounts receivable and deferred revenues of

$2.8

million and deferred costs of

$1.8

million associated with sales to Milestone China and its agents. As of

December 31, 2017,  

Milestone Scientific had deferred revenues and accounts receivable  of approximately

$1.7

million and deferred costs of approximately

$1.1

million associated with sales to Milestone China and its agents. Milestone Scientific recognized

no

related party revenue from Milestone China and it’s agents for

three

and

six

months ended

June 30, 2018. 

Milestone Scientific recognized

$356,400

and 

$

1.7

 million of related party revenue for the

three

and

six

months ended

June 30, 2017.

 

Other

In

August 2016,

K. Tucker Andersen, a significant stockholder of Milestone Scientific, entered into a

three

-year agreement with Milestone Scientific to provide financial and business strategic services. Expenses recognized on this agreement were

$25,000

and

$50,000

for the

three

and

six

months ended

June 30, 2018

and

2017,

respectively.

In

January 2017,

Milestone Scientific entered into a

twelve

-month agreement with Innovest S.p.A. to provide consulting services. This agreement will renew for successive

twelve

-month terms unless terminated by Innovest S.p.A or Milestone Scientific. Expenses recognized on this agreement were

$20,000

and

$40,000

for the

three

and

six

months ended

June 30, 2018

and

2017,

respectively

.