Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Notes Receivable

v3.8.0.1
Note 4 - Notes Receivable
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Financing Receivables [Text Block]
NOTE
4
 — NOTES RECEIVABLE
 
In
June 2017,
Milestone Scientific entered into an agreement for the sale of its
forty
percent (
40%
) interest in Milestone China (the “Milestone China Shares”) to an unaffiliated United States domiciled purchaser and a
10
-year option agreement to repurchase the Milestone China Shares. The purchase price for the Milestone China Shares was
$1,400,000
of which
$125,000
was paid in cash and
$1,275,000
was paid by delivery of a non-interest bearing secured promissory note. The note was payable in quarterly installments of
$125,000
 and was secured by the Milestone China Shares until full repayment.  In addition, the purchaser was precluded from selling all or substantially all its assets prior to repayment of the note. The
10
-year option agreement provides Milestone Scientific an option to repurchase the Milestone China Shares at
$1,400,000
within the
first
two
years and at fair market value (as defined in such agreement) for the remainder of the 
10
-year term.
 
The transaction has been accounted for as a secured financing and Milestone Scientific will continue to account for its relationship with Milestone China under the equity method of accounting. A note receivable is presented on the Company’s condensed consolidated balance sheet, along with a deferral from financing transaction (
$1,400,000
). The carrying value of the
forty
(
40%
) percent investment at the transaction date was zero.
 
As of
March 2, 2018,
the promissory note was in default. In
April 2018,
Milestone Scientific entered into a Release, Assignment and 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
1.4
million shares of Milestone China’s common stock to Milestone Scientific and cancelled the promissory note (see Note
16
).