Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Investment in Unconsolidated Subsidiaries

Note 5 - Investment in Unconsolidated Subsidiaries

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

NOTE -

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

March

31,

2017,

Milestone Scientific owns

25%

of this entity. 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

March

31,

2017.

As such, Milestone Scientific has written-off the

$78,798

advanced to Advanced Ocular as of

December

31,

2016.

Advance Ocular was not included in the

condensed

consolidated financial statements at

March

31,

2017

as no investment has been made by Milestone Scientific.

Milestone China Ltd.

June

2014,

Milestone Scientific invested

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.

Milestone Scientific recorded a loss on its investment in Milestone China of

and

$164,837,

as of

March

31,

2017

and

2016,

respectively. Milestone Scientific' investment in Milestone China was

as of

March

31,

2017

and

December

31,

2016,

respectively.

Milestone Scientific incurred losses on its investment in Milestone China of

$1,528,376

and

$1,124,350

as of

March

31,

2017

and

December

31,

2016,

respectively, which have been suspended.

Milestone Scientific had

$356,400

and

$1,000,000

of related party sales of handpieces and instruments during the

three

months ended

March

31,

2017

and

2016,

respectively, to Milestone China. As of

March

31,

2017

and

December

31,

2016

Milestone Scientific recorded deferred revenues and deferred costs associates with sales to Milestone China of

$356,400

and

$181,116,

and

$1,001,800

and

$620,041,

respectively. As of

March

31,

2017

and

December

31,

2016

Milestone China owes

$1,358,200

and

$2,714,600

, respectively,

to Milestone Scientific for handpieces and STA instruments which is included in Accounts Receivable from related party on the condensed consolidated balance sheets

. Milestone China paid

$1,001,800

million in

April

2017

to satisfy the outstanding instruments sales from

2016

and therefore

$1,001,800

has been recorded in revenue related to

2016

sales for the

three

months ended

March

31,

2017.

Milestone Scientific recognizes the total revenue and costs of goods sold at the time the shipment of instruments and handpieces to Milestone China are paid. However, due to timing differences 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

$675,391

and

$630,990,

as of

March

31,

2017

and

December

31,

2016,

respectively was included within accounts receivable from related party in the condensed consolidated balance sheets. The profit deferred was

$44,401

and

$104,889

as of

March

31,

2017

and

2016,

respectively, and was included within loss on earnings from China Joint Venture on the condensed consolidated statements of operations.

The following table includes summarized financial information of Milestone China:

	March 31, 2017			December 31, 2016
		(Unaudited)			(Unaudited)
Assets:
Current Assets	$	10,110,398		$	9,362,198
Non-Current Assets		2,743,178			2,467,547
Total Assets:		12,853,375			11,829,745

Liabilities:
Current Liabilities		11,884,862			9,900,611
Stockholders' equity		968,714			1,929,134
Total liabilities and stockholders ’ equity	$	12,853,575		$	11,829,745

	March 31, 2017			March 31, 2016
Net Sales	$	427,400		$	272,220
Cost of Goods Sold		479,411			209,400
Gross Profit		(52,011	)		62,820
Other Expenses		(958,055	)		(379,773	)
Net Losses	$	(1,010,066	)	$	(316,953	)