NOTE

– 4

INVESTMENT IN

UNCONSOLIDATED SUBSIDIARIES

Advance Ocular Science SA

Advanced Ocular Sciences SA is an entity organized to develop an instrument that delivers injections into the eyes. The company is a shell company as of June 30, 2016. Milestone Scientific owns 25% of this entity. As of the balance sheet date, no equity has been contributed to the company by Milestone Scientific. During 2015, Milestone Scientific advanced $78,798 for marketing and strategy planning to Advanced Ocular Sciences SA. Advanced Ocular Sciences SA., or their organizers are obligated to repay this advance once the public offering is approved and funded in Poland during 2016. Advance Ocular Sciences SA was not included in the consolidated financial statements at June 30, 2016 as no investment has been made by Milestone Scientific. The suspended losses approximated $19,700 at June 30, 2016.

Milestone China

Ltd.

In June 2014, Milestone Scientific agreed to invest $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 the Milestone Scientific’s investment by approximately $165,000 which represents the cost of the instruments. This did not increase the company’s percentage of ownership since the contribution is proportionate to the other shareholder contribution. Milestone Scientific recorded a loss on its investment in Milestone China of $57,882 and $222,719 for the three and six months ended June 30, 2016. Milestone Scientific recorded a loss on its investment in Milestone China of $160,654 and $63,979 for the three and six months ended June 30, 2015. Milestone’s investment in Milestone China was $0 and $284,672 at June 30, 2016 and 2015, respectively. Milestone Scientific had suspended losses on its investment in Milestone China of $363,833, as of June 30, 2016.

Wand Dental sold $1,356,000 in instruments and handpieces during the six months ended June 30, 2016 to Milestone China.

Milestone China owes $1,156,000 Wand Dental for STA instruments and handpieces shipped in 2016, which is included in accounts receivable at June 30, 2016.

Milestone Scientific recognizes the total revenue and costs of goods sold at the time the shipment of instruments and handpieces. 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 Accounting Standard Codification (“ASC”) 323

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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 $127,663 is included in the loss from Milestone China within the Condensed Consolidated Statements of Operations and presented as a reduction of the accounts receivable in the Condensed Consolidated Balance Sheets.

The following table includes summarized financial information for Milestone China unconsolidated subsidiary.
	June 30, 2016		December 31, 2015
	(unaudited)		(audited)
Assets:
Current Assets	$	5,114,791	$	772,999
Non-Current Assets		1,373,209		903,766

Total Assets:	$	6,488,000	$	1,676,765

Liabilities
Current Liabilities		4,427,526		580,613

Stockholders' equity		2,060,474		1,096,152

Total liabilities and stockholders ’ equity	$	6,488,000	$	1,676,765

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(unaudited)			(audited)			(unaudited)			(audited)

Net Sales	$	2,043,282		$	-		$	2,315,502		$	1,033,200
Cost of Good Sold		1,729,489			-			2,085,119			668,289
Gross Profit		313,793			-			230,383			364,911
Other Expenses		463,199			(401,632	)		696,742			524,897
Net Loss	$	(149,406	)	$	(401,632	)	$	(466,359	)	$	(159,986	)