Note 8 - Investment in Unconsolidated Affiliate

6 Months Ended

Jun. 30, 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. As of

June 30, 2018,

and 

December 31, 2017,

Milestone Scientific's investment in Milestone China was

$0.

 As of

June 30, 2018,

and

December 31, 2017,

Milestone Scientific’s share of cumulative losses of Milestone China were

$3,701,498

 and

$3,147,470,

respectively, which have been suspended.

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 by Milestone China. At

June 30, 2018

and

December 31, 2017,

deferred profit was 

$636,126

 and

$751,500,

respectively, which is included in deferred profit, related party in the condensed consolidated balance sheets. Milestone Scientific recorded earnings and loss on its investment in Milestone China of

$78,591

and

$115,374,

for the

three

and

six

months ended

June 30, 2018,

respectively, and

$15,460

 and (

$28,941

) for the

three

and

six

months ended

June 30, 2017,

respectively, inclusive of the intra-entity deferral of profit.

Milestone Scientific defers the total revenue and costs of goods sold when devices and handpieces are shipped to Milestone China and Milestone China’s agents due to market conditions and Milestone China liquidity concerns, until a payment is received. As of

June 30, 2018,

Milestone Scientific had deferred revenues and deferred costs associated with sales to Milestone China and its agents was approximately 

$2.8

million and

$1.8

million. As of

December 31, 2017, 

Milestone Scientific had deferred revenues and deferred costs associated with sales to Milestone China and its agents was approximately

$1.7

million and

$1.1

million, respectively. Milestone Scientific recognized

no

related party revenue from Milestone China and it’s agents for

three

and

six

months ended

June 30, 2018. 

Milestone Scientific recognized

$356,400

and 

$

1.7

 million of related party revenue for the

three

and

six

months ended

June 30, 2017. 

See Note

14

for  related party transactions.

The following table includes summarized financial information (unaudited) of Milestone China:

	June 30, 2018			December 31, 2017
Assets:
Current assets	$	13,700,622		$	13,127,422
Non-current assets		3,258,274			3,213,520
Total assets:	$	16,958,896		$	16,340,942
Liabilities:
Current liabilities	$	20,633,618		$	18,468,937
Stockholders' deficit		(3,674,722	)		(2,127,995	)
Total liabilities and stockholders’ deficit	$	16,958,896		$	16,340,942

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net sales	$	1,328,079		$	322,226		$	2,085,034		$	1,165,552
Cost of goods sold		650,840			422,789			1,098,452			889,204
Gross Profit		677,239			(100,563	)		986,582			276,348
Other Expenses		(1,119,440	)		(643,570	)		(2,371,652	)		(1,601,666	)
Net Losses	$	(442,201	)	$	(744,133	)	$	(1,385,070	)	$	(1,325,318	)