Summary of Significant Accounting Policies
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2014
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Principles of Consolidation The accompanying consolidated financial statement have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the account of Milestone 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 company that is seventy (70) percent owned by Milestone. The minority interest (thirty percent) in ACS is recorded in the equity section of the consolidated financial statements as noncontrolling interest. All significate intercompany transactions and balances have been eliminated in the consolidation. 2. Cash and Cash Equivalents Milestone considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 3. Accounts Receivable Milestone records accounts receivable at estimated net realizable value. The realization of accounts receivable current and long-term will have a significant impact on Milestone. Consequently, Milestone estimates losses resulting from the inability of its customers to make payments for amounts billed. The collectability of outstanding amounts is continually assessed (historical trend and credit worthiness of the customers). 4. Marketable Securities - Treasury Bills Milestone invests excess cash in Treasury Bills with varying maturities, which are classified as available-for-sale securities and are re-measured to fair value on a recurring basis and are valued using Level 1 inputs, which are quoted prices (unadjusted) for identical assets in active markets: 5. Product Return and Warranty Milestone does not accept non-defective returns from its customers. Product returns under warranty are accepted, evaluated and repaired or replaced in accordance with the Warranty Policy. Returns not within the Warranty Policy are all evaluated and the customer is charged for the repair. Warranty expense was $79,017 and $97,234 for 2014 and 2013, respectively. Non-Warranty repairs are collected from the customers. Non-Warranty repair income was $60,473 and $118,344 for 2014 and 2013, respectively. 6. Inventories 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. 7. Investment in Unconsolidated Subsidiaries Milestone Medical Inc. Milestone has entered into a joint venture with a third party to form Milestone Medical Inc. (“Medical”), for the purpose of developing and commercializing two medical instruments. At inception, Milestone owned fifty percent of the joint venture and is recording its investment on the equity method of accounting. Milestone’s proportionate share of losses incurred by Medical is charged to the Statement of Operations and adjusted against the Investment in Joint Venture. In the fourth quarter of 2013, Medical issued 2 million shares of its common stock in a private placement transaction. As a result of the shares being issued, Milestone’s ownership in the Joint Venture was reduced to 45.5% and Milestone recorded a gain of $1,363,650 as a result of the dilutive effect of these additional shares issued by Medical. In the fourth quarter of 2014, Milestone Scientific purchased 995,000 shares, which increased its ownership to 49.9%, from a founding shareholder for $447,750 ($0.45 per share). Milestone China Inc. In June 2014, Milestone 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 Inc. (“Milestone China”), a Hong Kong based medical and dental distribution company. The instruments will be shipped to the distributors over a period of two years and Milestone China will purchase future STA handpieces on a cash basis as required. 300 STA instruments were shipped in July 2014 and were recorded at Milestone’s cost in the investment in Milestone China on the Balance Sheet in the third quarter of 2014. Milestone China did not begin operations until July 2014, and incurred a loss of $2,025 for the year ending December 31, 2014. Forty percent of the loss, ($810), was recorded in the consolidated statement of operations for the year ended December 31, 2014. Accordingly, the investment is recorded as $348,651 as of December 31, 2014. 8. Furniture, Fixture and Equipment Equipment is recorded at cost, less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, which range from five to seven years. The costs of maintenance and repairs are charged to operations as incurred. 9. Intangible Assets - Patents Patents are recorded at cost to prepare and file the applicable documents with the United States Patent Office, or internationally with the applicable governmental office in the respective country. Although certain patents have not yet been approved, the costs related to these patents are being amortized using the straight-line method over the estimated useful life of the patent. If the applicable patent application is ultimately rejected, the remaining unamortized balance will be expensed in the period in which Milestone receives a notice of such rejection. Patent applications filed and patents obtained in foreign countries are subject to the laws and procedures that differ from those in the United States. Patent protection in foreign countries may be different from patent protection under United States laws and may not be favorable to Milestone. Milestone also attempts to protect the proprietary information through the use of confidentiality agreements and by limiting access to the facilities. There can be no assurance that the program of patents, confidentiality agreements and restricted access to the facilities will be sufficient to protect the proprietary technology. 10. Impairment of Long-Lived Assets Milestone reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. The carrying value of the assets is evaluated in relation to the operating performance and future undiscounted cash flows of the underlying assets. Milestone adjusts the net book value of an underlying asset if its fair value is determined to be less than its net book value. Milestone has reviewed long-lived assets for impairment and concluded no impairment exist as of December 31, 2014 and 2013. 11. Revenue Recognition Revenue from product sales is recognized net of discounts and allowances to the domestic distributor on the date of shipment of the goods, for essentially all shipments, since the terms are FOB warehouse. Milestone recognizes revenue on date of arrival where shipments are FOB destination. Shipments to the international distributors are FOB warehouse and revenue is therefore recognized on shipment. In both cases, the price to the buyer is fixed and the collectability is reasonably assured. Further, Milestone has no obligation on these sales for any post sale installation, set-up or maintenance, these being the responsibility of the buyer. Customer acceptance is considered made at delivery. The only obligation after sale is the normal commercial warranty against manufacturing defects if the alleged defective unit is returned within the warranty period. 12. Shipping and Handling Costs Milestone includes shipping and handling costs in cost of goods sold. These costs are billed to customers at the time of shipment for domestic shipments. International shipments are FOB warehouse, therefore no costs are incurred by Milestone. 13. Research and Development Research and development costs, which consist principally of new product development costs payable to third parties, are expensed as incurred. 14. Advertising Expenses Milestone expenses advertising costs as they are incurred. For the years ended December 31, 2014 and 2013, Milestone recorded advertising expenses of $26,569 and $30,104, respectively. 15. Income Taxes Milestone accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or credit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 16. Basic and diluted net loss per common share Milestone presents “basic” earnings (loss) per common share applicable to common stockholders and, if applicable, “diluted” earnings (loss) per common share applicable to common stockholders pursuant to the provisions of Statement of Financial Accounting Standards ASC Topic 260. Basic earnings (loss) per common share is calculated by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding and to be issued during each period. The calculation of diluted earnings per common share is similar to that of basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options, warrants, and the conversion of debt were issued during the period. Since Milestone had net losses for 2014, the assumed effects of the exercise of outstanding stock options and warrants were not included in the calculation as their effect would have been anti-dilutive. Such outstanding options and warrants totaled 1,488,796 at December 31, 2014. 17. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the allowance for doubtful accounts, inventory valuation, and cash flow assumptions regarding evaluations for impairment of long-lived assets and valuation allowances on deferred tax assets. Actual results could differ from those estimates. 18. Fair Value of Financial Instruments Fair Value Measurements: We follow the provisions of ASC 820, Fair Value Measurements and Disclosures related to financial assets and liabilities that are being measured and reported on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). We are required to classify fair value measurements in one of the following categories: Level 1 inputs which are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs which are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. 19. Stock-Based Compensation Milestone accounts for stock-based compensation under ASC Topic 718, Share-Based Payment. ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations over the service period, as an operating expense, based on the grant-date fair values. The weighted-average fair value of the options granted during 2014 and 2013 was estimated as $2.18 and $1.62, respectively, on the date of grant. The fair value for 2014 and 2013 was determined using the Black-Scholes option-pricing model with the following weighted average assumptions:
20. Recent Accounting Pronouncements On May 28, 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2014-10, Revenue from Contracts with Customers. The objective of this update is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. This standard update contains principles that the Company will apply to determine the measurement of revenue and timing of when it is recognized. The Company will adopt this guidance effective January 1, 2017, and is currently assessing the impact it may have on the Company's consolidated financial statements. In August 2014, the FASB issued authoritative guidance requiring management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Certain additional financial statement disclosures are required if such conditions or events are identified. This guidance is effective for the annual reporting period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of this guidance on its financial statements and disclosures. In November, 2014, the FASB issued Accounting Standards Board Update No. 2014-17: Business Combinations - Pushdown Accounting (“ASU 2014-17”). ASU 2014-17 provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. This new guidance became effective on November 18, 2014. The requirements of ASU 2014-17 did not have any impact on the Company’s financial statements.
|