Note O - Related Party Transactions

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE O -- 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 manufacturer of its handpieces, pursuant to which it manufactures products under specific purchase orders, but without minimum purchase commitments. Purchases from this manufacturer were

$1.2

 million for the years ended

December 31, 2019

and

2018.

As

December 31, 2019 

and

2018,

Milestone Scientific owed this manufacturer

$943,000

 and

$1.3

 million, respectively, which is included in accounts payable, related party on the consolidated balance sheets.  In

February 

2019,

Milestone Scientific board of directors granted United Systems

285,714

shares of stock at

$0.35

or

$100,000

for consulting services. These shares were issued

July 2019.

During  

2018

Milestone Scientific through its wholly owned subsidiary, Wand Dental, entered into an agreement with United Systems. 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

December 31, 2019, 

Wand Dental has deferred royalty income of

$342,540

that 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 and is included in accounts receivable, related party and deferred revenue, related party on the consolidated balance sheets.  This receivable is included in the reserved receivables in Note F.  

Also, during the year ended

December 31, 2018,

a Distribution Agreement between Wand Dental and United Systems was formed.  Under the Distribution agreement United Systems purchased

1,000

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 has deferred approximately

$750,000

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

December 31, 2018.

As of

December 31, 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, party related to Milestone China disclosed on the consolidated balance sheets. This receivable, deferred revenue and deferred cost is included in the reserved receivables in Note F. 

In

July 2019,

United System issued a credit to the Company for approximately

$151,000

for handpieces founded to be defective. The Company recorded the credit in cost of sales since the Company previously recorded an allowance for against inventory during 

2018.

Milestone China

Milestone Scientific owns a

40%

interest in Milestone China. See Note F.

Other

As of 

December 31, 2019

and 

2018

Milestone Scientific has deferred compensation and accrued pension due to Leonard Osser of approximately

$493,000

and

$386,000,

respectively which is included accrued expenses related party.

As of 

December 31, 2019

and 

2018

Milestone Scientific has deferred compensation due to Joseph D'Agostino of 

$56,800

and

$28,400,

 respectively which is included accrued expenses related party.

As of 

December 31, 2019 

and

2018

Milestone Scientific recorded deferred compensation for Gian Trombetta  of approximately of and

$380,000,

and 

$216,000,

respectively which is included accrued expenses related party.

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

$100,000

for years ended

December  

31,

2019

and 

2018,

respectively.

In

January 2017,

Milestone Scientific entered into a

twelve

-month agreement with Innovest S.p.A., a significant stockholder of Milestone Scientific, 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

$80,000

for years ended

December 31, 2019

and 

2018,

respectively.

The Director of Clinical Affairs’ royalty fee was approximately

$403,000

 and

$465,000

 for the years ended

December 31, 2019

and

2018,

respectively. Additionally, Milestone Scientific expensed consulting fees to the Director of Clinical Affairs of

$156,000

 and

$186,000

for the years ended

December 31, 2019, 

and

2018,

respectively. As of

December 31, 2019

and

2018

Milestone Scientific owed the Director Clinical Affairs for royalties of approximately

$390,000

and

$364,000,

respectively, which is included in accounts payable, related party and accrued expense, related party.