Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Investment in Unconsolidated Affiliate

v3.8.0.1
Note 8 - Investment in Unconsolidated Affiliate
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Equity Method Investments and Joint Ventures Disclosure [Text Block]
 NOTE
8
 – INVESTMENT IN UNCONSOLIDATED AFFILIATE
  
Milestone China Ltd.
           
In
June 2014,
Milestone Scientific invested
$1
million in Milestone China Ltd. (“Milestone China”) by contributing
772
STA Instruments to Milestone China for a
40%
ownership interest. Milestone Scientific recorded this investment under the equity method of accounting. For the
three
months ended
March 31, 2018,
and
2017,
Milestone Scientific recorded a loss on its investment in Milestone China of
$0
and
$44,401,
respectively, inclusive of the intra-entity deferral of profit. As of 
March 31, 2018
and 
December 31, 2017,
Milestone Scientific's investment in Milestone China was
$0.
 As of
March 31, 2018,
and
December 31, 2017,
Milestone Scientific’s share of cumulative losses of Milestone china were
$3,524,617
and
$3,147,470,
respectively, which have been suspended.
 
As of
March 2, 2018,
the Note Receivable identified on the Balance Sheet was in default. If Milestone Scientific exercises its rights as a secured party it
may
be obligated to return to the purchaser up to the
$250,000
received for the Milestone China Shares as surplus. At
March 31, 2018,
Milestone Scientific did
not
receive a response from the purchaser of the Milestone China Shares and did
not
recorded any financial benefit from the sale of Milestone China Shares to date. Refer to Note
4
for subsequent actions.
 
Milestone Scientific had
no
related party sales of handpieces and devices to Milestone China and Milestone China’s agent for
three
months ended
March 31, 2018.
Milestone Scientific had
$1,001,800
of related party sales of handpieces and devices to Milestone China for the
three
months ended
March 31, 2017.
Milestone Scientific defers the total revenue and costs of goods sold when devices and handpieces are shipped to Milestone China and Milestone China’s agent due to market conditions and Milestone China liquidity concerns until a payment is received.
 
Due to timing differences of when the inventory sold to Milestone China is recognized and when Milestone China sells the acquired inventory to
third
parties, an elimination of the intra-entity profit is required as of the balance sheet date. In accordance with ASC
323,
“Investments – Equity Method and Joint Ventures”, Milestone Scientific has deferred
40%
of the gross profit associated with recognized revenue from Milestone China that has
not
been sold to
third
parties. At
March 31, 2018
and
December 31, 2017,
the deferred profit was 
$714,717
and
$751,500,
respectively, which is included in deferred profit, related party in the, condensed consolidated balance sheets.
 
The following table includes summarized financial information (unaudited) of Milestone China:
 
   
March 31, 2018
   
December 31, 2017
 
Assets:
               
Current assets
  $
10,678,999
    $
13,127,422
 
Non-current assets
   
3,381,262
     
3,213,520
 
Total assets:
  $
14,060,261
    $
16,340,942
 
                 
Liabilities:
               
Current liabilities
   
12,414,362
     
18,468,937
 
Stockholders' equity
   
1,645,899
     
(2,127,995
)
Total liabilities and stockholders’ equity
  $
14,060,261
    $
16,340,942
 
                 
   
March 31, 2018
   
March 31, 2017
 
Net sales
  $
756,956
    $
427,400
 
Cost of goods sold
   
(447,611
)    
(479,411
)
Gross Profit
   
309,345
     
(52,011
)
Other Expenses
   
(1,252,213
)    
(958,055
)
Net Losses
  $
(942,868
)   $
(1,010,066
)