NOTE H – INVESTMENT IN

UNCONSOLIDATED SUBSIDIARIES

Advance Ocular Science SA

Advanced Ocular Sciences SA ("Advanced Ocular") is a shell company attempting to develop an instrument to deliver injections into the eyes. As of

December 31, 2017,

Milestone Scientific owns

25%

of this entity. During

2015,

Milestone Scientific advanced

$78,798

for marketing and strategy planning to Advance Ocular, or its organizers, were obligated to repay this advance if a public offering of Advanced Ocular equity was approved and funded in Poland during

2016.

However, a public offering has yet to be completed in Poland. As a result, Milestone Scientific wrote-off the

$78,798

advanced to Advanced Ocular as of

December 31, 2016.

Advance Ocular was

not

included in the consolidated financial statements at

December 31, 2017

further investment has been made and there is

significant activity that would be considered material to the financial statements.

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

$795,827,

as of

December 31, 2017

and

2016,

respectively. Milestone Scientific's investment in Milestone China was

as of

December 31, 2017

and

2016,

respectively. Milestone Scientific incurred cumulative losses on its investment in Milestone China of

$3,147470

and

$1,124,350

as of

December 31, 2017

and

2016,

respectively, which have been suspended.

June 2017,

Milestone Scientific entered into an agreement for the sale of the Milestone China Shares to an unaffiliated United States domiciled purchaser and a

-year option agreement to repurchase the Milestone China Shares. The purchase price for the Milestone China Shares was

$1,400,000

of which

$125,000

was paid in cash and

$1,275,000

was paid by delivery of a non-interest bearing secured promissory note. The note is payable in quarterly installments of

$125,000

until paid in full and is secured by the Milestone China Shares until full repayment. In addition, pursuant to such note, the purchaser is precluded from selling all or substantially all its assets prior to repayment of the note. The

-year option agreement provides Milestone Scientific an option to repurchase the

40%

equity interest at

$1,400,000

within the

first

two

years and at fair value (as defined in such agreement) for the remainder of the

-year term. The transaction has been accounted for as a secured financing and Milestone Scientific will continue to account for its relationship with Milestone China under the equity method of accounting. A note receivable is presented on the Balance Sheet, along with a deferral from financing transaction (

$1,400,000

). The carrying value of the

forty

(

40%

) percent investment at the transaction date was zero.

As of

March 2, 2018,

the promissory note was in default. If Milestone Scientific exercises its rights as a secured party it

may

be obligated to return to the purchaser up to the

$250,000

received for the Milestone China Shares as surplus. At this time Milestone Scientific has

not

received a response from the purchaser of the Milestone China Shares, Milestone Scientific has

not

recorded any financial benefit from the sale of Milestone China Shares to date.

Milestone Scientific had

$2,071,000

of related party sales of handpieces and instruments to Milestone China and Milestone China

’s agent for

twelve

months ended

December 31, 2017.

Milestone Scientific had

$3,425,000

of related party sales of handpieces and instruments to Milestone China for

twelve

months ended

December 31, 2016.

Milestone Scientific defers the total revenue and costs of goods sold when instruments and handpieces are shipped to Milestone China and Milestone China’s agent due to market conditions and Milestone China liquidity concerns.

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

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. At

December 31, 2017

and

2016,

the deferred profit was

$751,500

and

$630,990,

respectively, which is included in deferred profit, related party in the consolidated balance sheets. For

twelve

months ended

December 31, 2017

and

2016,

the loss on equity investment was

$120,510

and

$795,827,

respectively, which is included in the consolidated statements of operation.

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

	December 31, 2017		December 31, 2016
Assets:
Current assets	$	13,127,422	$	9,362,198
Non-current assets		3,213,520		2,467,547
Total assets:		16,340,942		11,829,745

Liabilities:
Current liabilities		18,468,937		9,900,611
Stockholders' equity		(2,127,995)		1,929,134
Total liabilities and stockholders ’ equity	$	16,340,942	$	11,829,745

	December 31, 2017		December 31, 2016
Net sales	$	1,666,605	$	1,126,484
Cost of goods sold		477,200		976,106
Gross Profit		1,189,405		150,378
Other Expenses		(6,247,205)		(2,834,980	)
Net Losses	$	(5,057,800)	$	(2,684,602	)