Summary of Accounting Policies
|6 Months Ended|
Jun. 30, 2015
|Accounting Policies [Abstract]|
|Summary of Accounting Policies||
NOTE -1 SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statement have been prepared in accordance with accounting principles generally accepted a Delaware corporation in the United States (“GAAP”) and include the account of Milestone Scientific and its wholly owned subsidiary Wand Dental Inc. Additionally, the consolidated financial statement include the account of Milestone Scientific Advanced Cosmetic System, Inc. (“ACS”), a Delaware corporation that is seventy (70) percent owned by Milestone Scientific. The minority interest (thirty percent) in ACS is recorded in the equity section of the consolidated financial statements as noncontrolling interest. All significant intercompany transactions and balances have been eliminated in the consolidation.
ACS was organized in July 2014 by Milestone China (defined below) which is 40% owned by Milestone Scientific. ACS is owned fifty percent by Milestone China and fifty percent by Milestone Scientific. Milestone China has provided $900,000 of cash and Milestone Scientific will provide a royalty-free license to utilize its technology to develop a Botox instrument. Milestone Scientific will also provide the resources to design and commercialize the instrument at cost. Through attribution Milestone Scientific owns seventy percent of ACS.
The realization of Accounts Receivable current and long-term will have a significant impact on Milestone Scientific. The criteria used by management to evaluate the adequacy of the allowance for doubtful accounts included, among others, credit worthiness of the customer, current trends, prior payment performance, the age of the receivables and Milestone Scientific’s overall historical experience.
Inventory costing, obsolescence and physical control are significant to the on-going operation of the business. 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.
Investment in Milestone Medical
In March 2011, Milestone Scientific entered into a joint venture (the “Medical Joint Venture”) with Beijing 3H Scientific Technology Co., Ltd. (“Beijing 3H”), a People’s Republic of China (“PRC”) Company. Milestone Scientific contributed an exclusive worldwide royalty-free license for the development and commercialization of intra-articular and epidural drug delivery instruments, utilizing its patented CompuFlo technology to the Medical Joint Venture, and a group of individual investors including the controlling shareholders of Beijing 3H and a large shareholder of Milestone Scientific contributed $1.5 million. Milestone Scientific, with the consent of the investors, organized a domestic research and development joint venture corporation, now known as Milestone Medical Inc. (“Milestone Medical”). In the fourth quarter of 2014, the joint venture agreement with Beijing 3H was terminated. However, Milestone Medical has continued to implement its business plan. As of June 30, 2015, Milestone Scientific owned 49.98% of the Milestone Medical and has recorded the investment using the equity method of accounting.
Investment in Milestone China
In July 2014, Milestone Scientific agreed to invest $1.0 million through the contribution of 772 STA instruments for a forty percent ownership in Milestone China Inc., a Hong Kong based medical and dental distribution company (“Milestone China”). 772 STA instruments were shipped in 2014 and were recorded at Milestone Scientific’s cost in the investment account for Milestone China on the Balance Sheet in the fourth quarter 2014. The distributor will purchase STA handpieces on a cash basis as required. Milestone China began operations in July 2014.
Impairment of Long-Lived Assets
The long lived assets of Milestone Scientific, principally patents and trademarks are the base features of the business. Milestone Scientific reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. The carrying value of the asset is evaluated in relation to the operating performance and future undiscounted cash flows of the underlying assets.
Revenue from product sales is recognized net of discounts and allowances to domestic distributors on the date of shipment for essentially all shipments, since the shipment terms are FOB warehouse. Milestone Scientific will recognize revenue on date of arrival of the goods at the customer’s location where shipments are FOB destination. Shipments to international distributors are FOB the warehouse and revenue is therefore recognized on shipment except on sales to Milestone China where only 60% of revenue is recognized on shipment and the balance is deferred until the goods have been sold to a 3rd Party by Milestone China. 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.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued a new standard ASU No. 2014-09, “Revenue from Contracts with Customers.” Under ASU 2014-09 recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for Milestone Scientific on January 1, 2017. 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 February 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The new standard affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. It will be effective for Milestone Scientific on January 1, 2016. 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.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://www.xbrl.org/2003/role/presentationRef