Note 10 - Related Party Transactions

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 10 -- RELATED PARTY TRANSACTIONS

United Systems

Milestone Scientific has a supply agreement with United Systems (whose controlling shareholder, Tom Cheng, is a significant stockholder of Milestone Scientific), the principal manufacturer of our handpieces, pursuant to which the manufacture is under specific purchase orders, but without minimum purchase commitments. Purchases from this manufacturer were approximately $ 501,000 and $1.7 million for the three and nine months ended September 30, 2024, respectively. Purchases from this manufacturer were approximately $636,000 and $1.9 million for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024 and December 31, 2023, Milestone Scientific owed this manufacturer approximately $720,000, and $402,000, respectively, which is included in accounts payable, related party and accrued expense, related party on the unaudited consolidated balance sheets. 

Director of Clinical Affairs

The Director of Clinical Affairs’ royalty fee was approximately $124,000 and $334,000 for the three and nine months ended September 30, 2024, respectively. The Director of Clinical Affairs’ royalty fee was approximately $104,000 and $370,000 for the three and nine months ended September 30, 2023, respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of $39,000 and $117,000 for the three and nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, Milestone Scientific owed the Director of Clinical Affairs for royalties of approximately $132,000 and $114,000, respectively, which is included in accounts payable, related party and accrued expense, related party, in the unaudited consolidated balance sheets. 

Leonard Osser, Director

On March 2, 2021, the Company entered into a Royalty Sharing Agreement with Leonard Osser, pursuant to which Mr. Osser sold, transferred and assigned to the Company all of his rights in and to a certain patent application as to which he is a co-inventor with Mark Hochman, a consultant to the Company, and the Company agreed to pay to Mr. Osser, beginning May 9, 2027, half of the royalty (2.5%) on net sales that would otherwise be payable to Mark and Claudia Hochman under their existing Technology Sale Agreement, dated January 1, 2005 and amended from time to time, with the Company. In connection with the Royalty Sharing Agreement, the Hochman's agreed with the Company, pursuant to an addendum to such Technology Sale Agreement dated February 25, 2021, to reduce from 5% to 2.5% the payments due to them under their Technology Sale Agreement beginning on May 9, 2027, and thereafter with respect to dental products embodying the invention.

As part of the Succession Plan of the Company, Mr. Osser agreed, pursuant to an agreement dated April 6, 2021 (the “Succession Agreement”), to restructure certain of his existing agreements with the Company, which provide for additional and broader executive support, and at such time as he elects to step down as Interim Chief Executive Officer of the Company, to become the Vice Chairman of the Board of the Company.

With respect to Mr. Osser’s July 2017 Employment Agreement and July 2017 Consulting Agreement (each as previously disclosed), the compensation under the Employment Agreement was modified to reduce the overall compensation by $100,000 to $200,000, split equally between a cash amount and an amount in shares, and the compensation under the Consulting Agreement was increased by $100,000 to $200,000, equally split between a cash amount and an amount in shares, which shares were formerly payable under the Employment Agreement. If the Company terminates Mr. Osser’s employment “Without Cause,” other than due to his death or disability, or if Mr. Osser terminates his employment for “Good Reason” (both as defined in the agreement), Mr. Osser is entitled to be paid in one lump sum payment as soon as practicable following such termination: an amount equal to the aggregate present value (as determined in accordance with Section 280G(d)(4) of the Code) of all compensation pursuant to this agreement from the effective date of termination hereunder through the remainder of the Employment Term. In connection with his acceptance of the Vice Chairman position and in consideration of his services as a member of the Board and agreement to provide certain additional general consulting services, Mr. Osser was granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five-year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. The Company believes that the effect of such existing agreements and the Succession Agreement, all of which relate to the period after such time Mr. Osser steps down as Interim Chief Executive Officer of the Company, collectively expand Mr. Osser’s consulting to and support of the Company beyond its Chinese operations to also include its medical and other products, while enhancing the retention aspects of the Company’s relationship with Mr. Osser. On May 19, 2021, Mr. Osser resigned as Interim Chief Executive Officer of the Company and assumed the role of Vice Chairman of the Board. 

Compensation under the Employment Agreement and the Consulting Agreement is payable for 9.5 years from May 19, 2021. The Company recorded expenses of $50,000, and $150,000 related to the Employment Agreement for the three and nine months ended September 30, 2024 and 2023, respectively. The Company recorded expenses of $50,000 and $150,000 related to the Consulting Agreement for the three and nine months ended September 30, 2024 and 2023, respectively.

Dr. D. Demesmin, Director

As of February 2024, the University Pain Medicine Center (STEMMEE), of which Dr. D. Demesmin, a Company board member is the CEO agreed to purchases products from the Company under the same terms and conditions applying to other medical pain clinics in the United States. STEMMEE purchased medical products in the amount of $6,000, and  $15,000  three and nine months ended September 30, 2024 from the Company.