Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Investment in Unconsolidated Subsidiaries

v3.5.0.2
Note 4 - Investment in Unconsolidated Subsidiaries
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Equity Method Investments and Joint Ventures Disclosure [Text Block]
NOTE
– 4 INVESTMENT IN
UNCONSOLIDATED SUBSIDIARIES
 
Advance Ocular Science SA
 
 
    
 
Advanced Ocular Sciences SA (“
Advanced Ocular”) is an entity organized to develop an instrument that delivers injections into the eyes. Advanced Ocular is a shell company as of September 30, 2016. Milestone Scientific owns 25% of this entity. As of the balance sheet date, no equity has been contributed to Advanced Ocular by Milestone Scientific. During 2015, Milestone Scientific advanced $78,798 for marketing and strategy planning to Advanced Ocular and they, or their organizers, are obligated to repay this advance once a public offering of Advanced Ocular equity is approved and funded in Poland during 2016. No public offering was completed in Poland as of September 30, 2016. As such, Milestone Scientific has written-off the $78,798 advanced to Advanced Ocular as of September 30, 2016. Advance Ocular was not included in the consolidated financial statements at September 30, 2016 as no investment has been made by Milestone Scientific. The suspended losses approximated $19,700 at September 30, 2016. 
 
Milestone China Ltd.
 
In June 2014, Milestone Scientific invested $1 million through the contribution
of 772 STA instruments (at a distributor price of approximately $1,296 per instrument) for a forty percent (40%) ownership in Milestone China Ltd. (“Milestone China”).  In 2014, the instruments were shipped and were recorded as an investment in Milestone China at the cost of the inventory contributed. In January 2016, Milestone Scientific contributed 308 STA instruments with a retail value of approximately $400,000 ($1,296 per instrument) to Milestone China which increased Milestone Scientific’s investment by approximately $165,000 which represents the cost of the instruments. This did not increase Milestone Scientific’s percentage of ownership since the contribution was proportionate to contributions from other shareholders.
 
Milestone Scientific recorded
a loss on its investment in Milestone China of $253,451 and $554,766 for the three and nine months ended September 30, 2016, respectively, and $123,083 and $187,062 for the three and nine months ended September 30, 2015, respectively. Milestone Scientific’s investment in Milestone China was $0 as of September 30, 2016 and December 31, 2015. Milestone Scientific had suspended losses on its investment in Milestone China of $405,205, as of September 30, 2016.
 
Milestone Scientific sold $3,203,466 in instrum
ents and handpieces during the nine months ended September 30, 2016 to Milestone China.  Milestone China owes $1,850,200 to Milestone Scientific for STA instruments and handpieces shipped in 2016, which is included in accounts receivable at September 30, 2016. Milestone China payment terms are ninety days from receipt of goods.
 
Milestone Scientific recognizes the total revenue and costs of goods sold at the time the shipment of instruments and handpieces to Milestone China. However, due to timing differen
ces of when the inventory is sold to Milestone China and when Milestone China sells the acquired inventory to third parties, elimination of the intra-entity profit is required as of the balance sheet date. In accordance with ASC 323 –
Equity Method and Joint
Ventures, Milestone Scientific has deferred the gross profit associated with inventory shipped to Milestone China that has not been sold to third parties. The deferred profit of $381,113 is included in the loss from Milestone China within the Condensed Consolidated Statements of Operations and presented in other liabilities in the Condensed Consolidated Balance Sheets.
 
The following table includes summarized financial information for Milesto
ne China the unconsolidated subsidiary:
 
   
September 30, 2016
   
December 31, 2015
 
   
(unaudited)
   
(unaudited)
 
Assets:
           
Current Assets
  $ 6,523,902     $ 772,999  
             
Non-Current Assets
  1,745,764     903,766  
             
Total Assets:
  $ 8,269,666     $ 1,676,765  
             
Liabilities
           
Current Liabilities
  4,406,577     580,613  
             
Stockholders' equity
  3,863,089     1,096,152  
             
Total liabilities and stockholders
’ equity
  $ 8,269,666     $ 1,676,765  
 
   
Three Months Ended September 30,
   
Nine Months Ended
September 30,
 
   
2016
   
2015
   
2016
   
2015
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
                         
Net Sales
  $ 329,617     $1,193,234     $ 2,645,119     $ 2,226,434  
Cost of Good Sold
  444,255     1,161,983     2,529,374     1,830,272  
Gross Profit
  (114,638 )   31,251     115,745     396,162  
Other Expenses
  (305,742 )   (338,963 )   (1,002,484 )   (863,819 )
Net Loss
  $ (420,380 )   $ (307,712 )   $ (886,739 )   $ (467,697 )