Quarterly report pursuant to Section 13 or 15(d)

Significant Accounting Policies (Policies)

v3.7.0.1
Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Consolidation, Policy [Policy Text Block]
1.
Basis of Consolidation
 
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include the accounts of Milestone Scientific and its wholly owned and majority owned subsidiaries, including, Wand Dental
(wholly owned), 
Milestone Advanced Cosmetic
(majority owned)
 and Milestone Medical
(majority owned).
Milestone Education is a variable interest entity of which Milestone Scientific is the primary beneficiary and is consolidated into Milestone Scientific's financial statements. All significant, intra-entity transactions and balances have been eliminated in the consolidation.   
Basis of Accounting, Policy [Policy Text Block]
2.
 Basis of Presentation
 
The unaudited condensed consolidated financial statements of Milestone Scientific have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions for Form
10Q
and Article
10
of Regulation S-
X.
Accordingly, they do
not
include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are
not
necessarily indicative of the results of operations which
may
be expected for a full year or any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended
December 31, 2016,
included in Milestone Scientific's Annual Report on Form
10
-K.
Reclassification, Policy [Policy Text Block]
3.
 
Reclassifications
 
Certain reclassifications have been made to the
2016
financial statements to conform to the consolidated
2017
financial statement presentation. These reclassifications had
no
effect on net loss or cash flows as previously reported.
 
Consolidation, Variable Interest Entity, Policy [Policy Text Block]
4.
Variable Interest Entities
 
A variable interest entity ("VIE") is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE.
If Milestone Scientific determines that it has operating power and the obligation to absorb losses or receive benefits, Milestone Scientific consolidates the VIE as the primary beneficiary. Milestone Scientific
’s involvement constitutes power that is most significant to the entity when it has unconstrained decision making ability over key operational functions within the entity.                  
 
Milestone Scientific is the primary beneficiary of Milestone Education as of
January 2016 (
see Note
4
). Accordingly, the assets and liabilities of Milestone Education are included in the accompanying
 condensed consolidated financial statements.
 
Because
  Milestone Scientific had an increasing  variable interest in  Milestone China, it further considered the guidance in Accounting Standard Codification ("ASC")
810
as it relates to determining whether Milestone China is a VIE and, if so, identifying the primary beneficiary. As Milestone China’s equity at risk and voting rights were
not
proportional to their economic interest, Milestone China was determined to be a VIE. Milestone Scientific would be considered the primary beneficiary of the VIE if it has both of the following characteristics:
 
●   Power Criterion: The power to direct the activities that most significantly impact the entity
’s economic performance; and
 
●   Losses/Benefits Criterion: The obligation to absorb losses that could potentially be significant or the right to receive benefits that could potentially be significant to the VIE.
 
Milestone management does
not
have the ability to control the activities that most significantly impact Milestone China's economics and, therefore, the power criterion has
not
been met. Management placed the most weight on the relationship and significance of activities of Milestone China to the majority shareholder/CEO of Milestone China.  As majority shareholder, majority holder of voting rights, and the active CEO, the
53%
investor has the power to direct the activities that most significantly impact the economic performance of Milestone China. Management has concluded that Milestone Scientific is
not
the primary beneficiary under ASC
810.
Accordingly, Milestone China has
not
been consolidated into the financial statements of Milestone Scientific and continues to be accounted for under the equity method (see Note
5
).
Cash and Cash Equivalents, Policy [Policy Text Block]
5.
Cash and Cash Equivalents
 
Milestone Scientific considers all highly liquid investments purchased with an original maturity of
three
months or less to be cash equivalents.
Trade and Other Accounts Receivable, Policy [Policy Text Block]
6.
Accounts Receivable
 
Milestone Scientific sells a significant amount of its product on credit terms to its major distributors. Milestone Scientific estimates losses from the inability of its customers to make payments on amounts billed. A majority of credit sales are due within
ninety
days from invoicing. There have
not
been any significant credit losses incurred to date.
Finance, Loans and Leases Receivable, Policy [Policy Text Block]
7.
Note Receivable
 
In
June 2017,
Milestone Scientific entered into an agreement for the sale of 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 th
e 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 is payable in quarterly installments of
$125,000
until paid in full and is secured by the Milestone China Shares until full repayment.  In addition, pursuant to such note, the purchaser is precluded from selling all or substantially all of its assets prior to repayment of the note. The
10
-year option agreement provides Milestone Scientific an option to repurchase the
40%
equity interest at
$1,400,000
within the
first
two
years and at fair 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 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. (See Note
5
).
Standard Product Warranty, Policy [Policy Text Block]
8.
Product Return and Warranty
 
Milestone Scientific generally does
not
accept non-defective returns from its customers. Product returns under warranty are accepted, evaluated and repaired or replaced in accordance with the Warranty Policy. Returns
not
within the Warranty Policy are evaluated and the customer is charged for the repair.
Inventory, Policy [Policy Text Block]
9.
Inventories
 
Inventories principally consist of finished goods and component parts stated at the lower of cost (
first
-in,
first
-out method) or market. Inventory quantities on hand are reviewed on a quarterly basis and a provision for excess and obsolete inventory is recorded if required based on past and expected future sales, potential technological obsolescence and product expiration requirements.
Equity Method Investments [Policy Text Block]
10.
Equity Method Investments
 
Investments in which Milestone Scientific has the ability to exercise significant influence, but do
not
control, are accounted for under the equity method of accounting and are included in the long term assets on the condensed consolidated balance sheets. Under this method of accounting, Milestone Scientific's share of the net earnings or losses of the investee is presented below the income tax line on the condensed consolidated statements of operations.
 
Milestone Scientific evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments
may
be impaired. If a decline in the value of an equity method investment is determined to be ot
her than temporary, a loss is recorded in earnings in the current period.
Property, Plant and Equipment, Policy [Policy Text Block]
11.
Furniture, Fixture and Equipment
  
 
Equipment is recorded at cost, less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, which range from
five
to
seven
years. The costs of maintenance and repairs are charged to operations as incurred.
Intangible Assets, Finite-Lived, Policy [Policy Text Block]
12.
  Intangible Assets - Patents
 
Patents are recorded at cost to prepare and file the applicable documents with the US Patent Office, or internationally with the applicable governmental office in the respective country. Although certain patents have
not
yet been approved, the costs related to these patents are being amortized using the straight-line method over the estimated useful life of the patent. If the applicable patent application is ultimately rejected, the remaining unamortized balance will be expensed in the period in which Milestone Scientific receives notice of such rejection.  
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
13.
Impairment of Long-Lived Assets
 
Milestone Scientific reviews long-lived assets for impairment whenever events or circumstances (i.e. a triggering event) indicate that the carrying amounts
may
not
be recoverable. The carrying value of the assets is evaluated in relation to the operating performance and future undiscounted cash flows of the underlying assets. Milestone Scientific adjusts the net book value of an underlying asset if its fair value is determined to be less than its net book value. There have been
no
impairment indicators or triggering events and therefore,
no
impairment reviews have been performed in the period ending
June 30, 2017.
Revenue Recognition, Policy [Policy Text Block]
14.
Revenue Recognition
 
Revenue from product sales is recognized, net of discounts and allowances to domestic distributors, on the date of shipment for substantially all shipments, since the shipment terms are FOB warehouse. Milestone Scientific recognizes revenue on date of arrival of the goods at the customer's location, where shipments are FOB destination. In all cases the price to the buyer is fixed and the collectability is reasonably assured. Further, Milestone Scientific has
no
obligation on these sales for any post installation, set-up or maintenance, these being the responsibility of the buyer. Milestone Scientific's only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period. Instrument and hand pieces are
not
bundled but rather sold separately and, as such, there are
no
multiple element determinations in connection with the revenue recognition.
Shipping and Handling Cost, Policy [Policy Text Block]
15.
Shipping and Handling Costs
 
Milestone Scientific includes shipping and handling costs in cost of goods sold. These costs are billed to customers at the time of shipment for domestic shipments. International shipments are FOB warehouse, therefore
no
costs are incurred by Milestone Scientific.
 
Research and Development Expense, Policy [Policy Text Block]
16.
Research and Development
 
Research and development costs, which consist principally of new product development costs payable to
third
parties, are expensed as incurred. Advance payments for the research are amortized to expense either as services are performed or over the relevant service period using the straight line method.
Income Tax, Policy [Policy Text Block]
17.
Income Taxes
 
Milestone Scientific accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Use of Estimates, Policy [Policy Text Block]
18.
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the allowance for doubtful accounts, inventory valuation, and cash flow assumptions regarding evaluations for impairment of long-lived assets and going concern considerations, and valuation allowances on deferred tax assets. Actual results could differ from those estimates
.
Fair Value of Financial Instruments, Policy [Policy Text Block]
19.
Fair Value of Financial Instruments
 
Fair Value Measurements: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). We are required to classify fair value measurements in
one
of the following categories:
 
●   Level
1
inputs which are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
 
●    
Level
2
inputs which are defined as inputs other than quoted prices included within Level
1
that are observable for the assets or liabilities, either directly or indirectly.
 
●   
Level
3
inputs are defined as unobservable inputs for the assets or liabilities.
 
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and
may
affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
New Accounting Pronouncements, Policy [Policy Text Block]
20.
Recent Accounting Pronouncements
 
In
May 2014,
the Financial Accounting Standards Board ("FASB") issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in
five
steps:
1
) identify the contract,
2
) identify performance obligations,
3
) determine the transaction price,
4
) allocate the transaction price, and
5
) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers.
In
August 2015,
the FASB issued guidance approving a
one
-year deferral, making the standard effective for reporting periods beginning after
December 15, 2017.
The FASB continues to release guidance clarifying certain aspects of the revenue guidance. We do
not
believe that this new accounting pronouncement will have a material impact on our financial statements.
 
In
November 2015,
the FASB issued guidance simplifying the balance sheet classification of deferred taxes. The new guidance requires that all deferred taxes be presented as noncurrent, rather than separated into current and noncurrent amounts. The guidance is effective for reporting periods beginning after
December 15, 2016
and early adoption is permitted. In addition, the adoption of guidance can be applied either prospectively or retrospectively to all periods presented. The Company has adopted this pronouncement as of
January 1, 2017,
and applied retrospectively, for its provision for income taxes disclosure. The adoption did
not
have an impact on the presentation of the balance sheet, as the Company assigns a full valuation allowance to its net deferred tax asset.
 
In Februa
ry
2016,
the FASB issued a new standard Accounting Standards Update ("ASU ")
No.2016
-
02,
"Leases"(Topic
842
). The new standard is intended to increase transparency and comparability among organizations to recognize lease assets and liabilities on the balance sheet and disclose key information about leasing arrangements. It will be effective for fiscal years beginning after
December 15, 2018.
Milestone Scientific is in the process of determining what impact, the adoption of this ASU will have on its financial position, results of operations and cash flows.
 
In
March 2016,
the FASB issued a new standard ASU
No.2016
-
07,
“Investments - Equity Method and Joint Ventures” (Topic
323
): The new standard is intended to eliminate the requirement that when an investment qualifies for the use of the equity method as a result of an in increase in the level of ownership or degree of influence, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect all of the previous periods that the investment was held. It will be effective for all entities for fiscal years and interim periods, beginning after
December 15, 2016.
The Company has adopted the standard, effective
January 1, 2017,
and has determined the adoption of this standard will
not
have an impact on its financial reporting.
 
In
March 2016,
the FASB issued a new standard ASU
No.2016
-
09,
Compensation – Stock Compensation” (Topic
718
): The new standard is intended, under FASB’s Simplification Initiative, to address certain diversity of application within previous guidance. The new standard primarily addresses certain tax aspects in connection with the stock compensation held. It will be effective for fiscal years and interim periods, beginning after
December 15, 2016.
The Company has adopted the standard, effective
January 1, 2017,
and the adoption did 
not
have a
material effect
on its financial reporting.
 
In
June 2016,
the FASB issued a new standard ASU
No.2016
-
13,
“Financial Instruments – Credit Losses” (Topic
326
).: The new standard is intended to replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. It will be effective for all entities for fiscal years and interim periods, beginning after
December 15, 2018.
Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its financial position, results of operations and cash flows.
 
In
August 2016,
the FASB issued a new standa
rd ASU
No.2016
-
15,
"Statement Cash Flows “Classification of Certain Cash Receipts and Cash Disbursements" Topic
230
). The new standard provides guidance as to the conformity of presentation of certain cash receipts and disbursements. It will be effective for all entities for fiscal years and interim periods, beginning after
December 15, 2017.
Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.
 
In
October 2016,
the FASB issued a new standard ASU
No.2016
-
17,
"Consolidation Interests Held through Related Parties That Are under Common Control"(Topic
810
). The new standard provides guidance as to consideration of consolidation requirements of a primary beneficiary and variable interest entity that are part of related party group under common control.
It will be effective for fiscal years and interim periods, beginning after
December 15, 2016.
Milestone Scientific has adopted the standard, effective
January 1, 2017,
which did
not
have an impact on its financial reporting.
 
In
November 2016,
the FASB issued a new standard ASU
No.2016
-
18,
“Statement of Cash Flows – Restricted Cash” (Topic
230
). The new standard provides guidance as to address the diversity of treatment of restricted cash on the statement of cash flows. It will be effective for all entities for fiscal years and interim periods, beginning after
December 15, 2017
and interim periods therein. Milestone Scientific does
not
expect the adoption of this ASU
to have a material effect
 
on its presentation within the statement of cash flows.
 
In
January 2017,
the FASB issued a new standard ASU
No.2017
-
01,
“Business Combinations” (Topic
805
). The new standard provides guidance to clarify the definition of a
‘business’, and assist entities in evaluation whether a transaction should be accounted for as an acquisition/disposal of assets or a business. It will be effective for public entities for fiscal years and interim periods, beginning after
December 15, 2017,
with limited early application. Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.
 
In
May 2017,
the FASB issued a new standard ASU
No.2017
-
09,
“Compensation – Stock Compensation” (Topic
718
). The new standard provides guidance and clarity for modification to equity based compensation programs. It will be effective for all entities for fiscal years and interim periods, beginning after
December 15, 2017.
Milestone Scientific is in the process of determining what impact, if any, the adoption of this ASU will have on its presentation within the statement of cash flows.