Quarterly report pursuant to Section 13 or 15(d)

Investment in Unconsolidated Subsidiaries

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Investment in Unconsolidated Subsidiaries
6 Months Ended
Jun. 30, 2015
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated Subsidiaries

NOTE – 5 INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

Milestone Medical Inc

Milestone Medical was initially owned fifty percent by the investors and fifty percent by Milestone Scientific. Milestone Medical had a zero net book value at June 30, 2015. For the six month June 30, 2015 Milestone Scientific offset advances to Milestone Medical by $37,469 which is the excess loss of the Company’s investment in Milestone Medical. Milestone Scientific has accounted for its investment in Milestone Medical using the equity method of accounting.

Milestone Scientific has distribution responsibility in the U.S. and Canada and, prior to the fourth quarter, Beijing 3H was responsible for distribution in Macao, Hong Kong and other regions of Asia. In the fourth quarter of 2014, the joint venture agreement with Beijing 3H was terminated and Milestone Medical contracted with Milestone China to become its new distributor in Asia for both the epidural and intra-articular instruments.

 

In July 2013, Milestone Scientific entered a strategic partnership with the largest provider of specialty sales and distribution solutions for healthcare in the United States. This agreement was terminated in the second quarter of 2015.

In the fourth quarter of 2014, Milestone Scientific purchased an additional 995,000 shares of Milestone Medical from another shareholder for $447,750 ($0.45 per share), which increased its percentage of ownership to 49.98% of Milestone Medical.

Milestone Scientific recorded a loss on its investment in Milestone Medical of $525,938 and $976,099 for the three and six months ended June 30, 2015 and $213,193 and $343,716 for the three and six months ended June 30, 2014, respectively. The losses described represent 49.98% and 45.5% of the applicable losses reported by Milestone Medical during the three and six months ended June 30, 2015 and 2014, respectively. Milestone Scientific utilizes the equity method of accounting to recognize its financial results of the Medical Joint Venture.

Milestone Scientific did not have any to the legal expenses for FDA for Milestone Medical for the three and six months ended June 30, 2015, respectively, for legal expenses related to seeking U.S. Food and Drug Administration (“FDA”) marketing clearance for the epidural and intra-articular instruments under section 510k. Milestone Scientific expensed $92,300 and $131,453 on behalf of Milestone Medical for the three and six months ended June 30, 2014, respectively, for legal expenses related to seeking U.S. Food and Drug Administration marketing clearance for the epidural and intra-articular instruments under section 510K. As part of the joint venture agreement, Milestone Scientific agreed to pay all the legal fees related to the FDA clearance process.

Milestone Scientific had an investment in Milestone Medical of zero and $760,750 as of June 30, 2015 and 2014, respectively, and suspended loss of $ 37,470. For the six month June 30, 2015 Milestone Scientific offset advances to Milestone Medical by $37,469 which is the excess loss of the company investment in Milestone Medical.

Milestone Education LLC.

The Education Joint Venture has been providing training and education to our dentists throughout the world. Milestone Scientific accounted for its investment in the Education Joint Venture using the equity method of accounting. The Education Joint Venture incurred a loss of $3,621 and $7,836 for the three and six months ended June 30, 2015, respectively. The Education Joint Venture incurred a loss of $4,406 and $7,822 for the three and six months ended June 30, 2014, respectively. Fifty percent of these losses were recorded in the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014.

 

Milestone China Inc

In June 2014, Milestone Scientific agreed to invest $1.0 million through the contribution of 772 STA instruments (at a distributor price of approximately $1,295 per instrument) for a forty percent ownership in Milestone China. The instruments will be shipped to the distributors over a period of two years. Milestone China will purchase additional STA handpieces as required. 772 STA instruments were shipped in 2014 and are recorded at Milestone Scientific’s cost in the investment account for Milestone China on the balance sheet at December 31, 2014. Milestone China did not begin operations until July 2014. Milestone Scientific recognized a loss of $160,654 and $63,979 from Milestone China, for the three and six months ended June 30, 2015. These amounts represents 40% of the loss of Milestone China for each period respectively. Milestone Scientific’s investment in Milestone China is $284,672 and $348,651 as of June 30, 2015 and December 31, 2014, respectively. Milestone Scientific shipped $150,600 of handpieces in the six months ended June 30, 2015. Additionally, Milestone Scientific shipped $549,800 instruments at the end of June 2015 that will be recorded in July 2015.